SB 0417 - Fiscal Note

Fiscal Note - SB 0417 - Requires non-participating tobacco manufacturers to deposit funds into escrow account

COMMITTEE ON LEGISLATIVE RESEARCH

OVERSIGHT DIVISION

FISCAL NOTE

L.R. NO.: 0860-03

BILL NO.: SB 417 with SCA 1

SUBJECT: Tobacco Products: Civil Procedure

TYPE: #Updated

DATE: March 3,1999

#To Change Assumptions Regarding Tobacco Company Escrow Account

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FISCAL SUMMARY

ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
Total Estimated Net Effect on All State Funds#	$0	$0	$0

ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
None
Total Estimated Net Effect on All Federal Funds	$0	$0	$0

ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED	FY 2000	FY 2001	FY 2002
Local Government	$0	$0	$0

Numbers within parentheses: ( ) indicate costs or losses

This fiscal note contains 3 pages.

FISCAL ANALYSIS

ASSUMPTION

Officials of the Office of the State Courts Administrator, Office of the Attorney General, Office of Administration, Office of the Treasurer, and the Department of Economic Development assume the proposed legislation would have no fiscal impact on their agencies or that they could accomplish duties under this proposal with existing resources.

In a previous version of this proposal, the Department of Revenue assumed it would require a new report from nearly half of the twenty cigarette manufacturers and importers to would be sure monies are being properly deposited into escrow. To create and review these reports, DOR assumed it would need 1 FTE Tax Processing Technician, and supportive equipment. #However, it has been determined that payments will not flow through the DOR rather they will be made directly into the escrow account by the manufacturers. Therefore, Oversight assumes no additional resources for DOR.

Oversight assumes payments made by tobacco manufacturers would be deposited into an escrow fund for distribution as provided by this proposal. Oversight estimated the amount of payments into the escrow account by assuming cigarette sales would be about 13.1 billion per year (the average for the last four fiscal years) and that contributors to the escrow fund would account for one-half of one percent of cigarette sales. The five largest cigarette manufacturers have virtually the entire United States cigarette market. The smallest manufacturer may be a non-participating manufacturer. That manufacturer has about 2% of the market, but is selling its four best selling brands to a participating manufacturer. #Oversight estimates revenues to the escrow account to be approximately $800,000 annually. However, officials of the Office of the Treasurer indicate that the escrow account will not be a state fund; therefore no impact to state funds is anticipated.

FISCAL IMPACT - State Government	FY 2000	FY 2001	FY 2002
#	0	0	0
FISCAL IMPACT - Local Government	FY 2000	FY 2001	FY 2002
#	0	0	0
FISCAL IMPACT - Small Business
No direct fiscal impact to small businesses would be expected as a result of this proposal.

DESCRIPTION

This proposal contains the provisions of the Model Statute, part of the Master Settlement Agreement (MSA) in the state's litigation against various tobacco manufacturers. The

Model Statute is intended to neutralize any cost disadvantages that the participating manufacturers experience in the state by requiring non-participating manufacturers to deposit monies into an escrow account, based on sales of units in the state. The funds can be withdrawn either due to judgments on released claims, overpayment of funds, or after 25 years have expired, in which case they revert to the manufacturers who deposited the funds.

This proposal contains an emergency clause.

This legislation is not federally mandated, would not duplicate any other program, and would not require additional capital improvements or rental space.

SOURCES OF INFORMATION

Office of the State Courts Administrator

Department of Revenue

Office of the Attorney General

Department of Economic Development

Office of Administration

Office of the State Treasurer

Jeanne Jarrett, CPA

Director

March 3, 1999