SCS HCS HB 814 -- TOBACCO SETTLEMENT MODEL STATUTE

This bill enacts the model statute as prescribed in the Master
Settlement Agreement entered into by the state of Missouri and
leading United States tobacco product manufacturers on November
23, 1998.

The model statute requires any tobacco product manufacturer
which chooses not to enter into the Master Settlement Agreement
to establish an escrow account with a federal or state chartered
bank and annually deposit amounts into the account based on the
number of tobacco units (cigarettes) sold by the manufacturer in
Missouri.  For the year 1999, the amount required to be
deposited in escrow will be about nine-tenths cent per
cigarette.  This amount will increase to about one and nine--
tenths cent per cigarette for 2007 and subsequent years.

Funds held in the escrow account may be released only to pay
judgments or settlements from claims brought against the
manufacturer by the state, its political subdivisions, and
certain other parties (but not individuals).  The manufacturer
will receive during the time the money is on deposit any
interest or gain earned on the escrow deposits and for release
of certain excess deposits.  Twenty-five years from the date of
deposit, deposits will be released from escrow and returned to
the manufacturer who made them.

The Department of Revenue will certify the amount owed by any
manufacturer on the basis of excise tax paid.  The manufacturer
must certify to the Attorney General that it has made the
required deposit into escrow.  Any manufacturer that fails to
make the required deposits will be required to come into
compliance within 15 days of the violation.  The court may
impose a civil penalty upon the manufacturer in violation in an
amount of 5% of the required deposits per day not to exceed
100%.  In the case of a knowing violation, the penalty is 15%
per day not to exceed 300%.  In the case of a second knowing
violation, the manufacturer will be prohibited from selling
tobacco products in Missouri for a period not to exceed 2
years.  The manufacturer in violation will also be required to
pay court costs and attorney fees resulting from the prosecution
of the violation by the Attorney General.

The bill has an emergency clause.

HCS HB 814 -- TOBACCO SETTLEMENT MODEL STATUTE (Smith)

This substitute enacts the model statute as prescribed in the
Master Settlement Agreement entered into by the state of
Missouri and leading United States tobacco product manufacturers
on November 23, 1998.

The model statute requires any tobacco product manufacturer
which chooses not to enter into the master settlement agreement
to establish an escrow account with a federal or state chartered
bank and annually deposit amounts into the account based on the
number of tobacco units (cigarettes) sold by the manufacturer in
Missouri.  For the year 1999, the amount required to be
deposited in escrow will be about nine-tenths cent per
cigarette.  This amount will increase to about one and nine--
tenths cent per cigarette for 2007 and subsequent years.

Funds held in the escrow account may be released only to pay
judgments or settlements from claims brought against the
manufacturer by the state, its political subdivisions, and
certain other parties (but not individuals).  The manufacturer
will receive during the time the money is on deposit any
interest or gain earned on the escrow deposits and for release
of certain excess deposits.  Twenty-five years from the date of
deposit, deposits will be released from escrow and returned to
the manufacturer who made them.

The Department of Revenue will certify the amount owed by any
manufacturer on the basis of excise tax paid.  The manufacturer
must certify to the Attorney General that it has made the
required deposit into escrow.  Any manufacturer that fails to
make the required deposits will be required to come into
compliance within 15 days of the violation.  The court may
impose a civil penalty upon the manufacturer in violation in an
amount of 5% of the required deposits per day not to exceed
100%.  In the case of a knowing violation, the penalty is 15%
per day not to exceed 300%.  In the case of a second knowing
violation, the manufacturer will be prohibited from selling
tobacco products in Missouri for a period not to exceed 2
years.  The manufacturer in violation will also be required to
pay court costs and attorney fees resulting from the prosecution
of the violation by the Attorney General.

The substitute has an emergency clause and will be effective on
the later of the date of its approval by the Governor or July 1,
1999.

FISCAL NOTE:  No impact on state funds.

HCS HB 814 -- TOBACCO SETTLEMENT MODEL STATUTE

SPONSOR:  McLuckie (Smith)

COMMITTEE ACTION:  Voted "do pass" by the Committee on Missouri
Tobacco Settlement by a vote of 14 to 0.

This substitute enacts the model statute as prescribed in the
Master Settlement Agreement entered into by the state of
Missouri and leading United States tobacco product manufacturers
on November 23, 1998.

The model statute requires any tobacco product manufacturer
which chooses not to enter into the master settlement agreement
to establish an escrow account with a federal or state chartered
bank and annually deposit amounts into the account based on the
number of tobacco units (cigarettes) sold by the manufacturer in
Missouri.  For the year 1999, the amount required to be
deposited in escrow will be about nine-tenths cent per
cigarette.  This amount will increase to about one and nine--
tenths cent per cigarette for 2007 and subsequent years.

Funds held in the escrow account may be released only to pay
judgments or settlements from claims brought against the
manufacturer by the state, its political subdivisions, and
certain other parties (but not individuals).  The manufacturer
will receive during the time the money is on deposit any
interest or gain earned on the escrow deposits and for release
of certain excess deposits.  Twenty-five years from the date of
deposit, deposits will be released from escrow and returned to
the manufacturer who made them.

The Department of Revenue will certify the amount owed by any
manufacturer on the basis of excise tax paid.  The manufacturer
must certify to the Attorney General that it has made the
required deposit into escrow.  Any manufacturer that fails to
make the required deposits will be required to come into
compliance within 15 days of the violation.  The court may
impose a civil penalty upon the manufacturer in violation in an
amount of 5% of the required deposits per day not to exceed
100%.  In the case of a knowing violation, the penalty is 15%
per day not to exceed 300%.  In the case of a second knowing
violation, the manufacturer will be prohibited from selling
tobacco products in Missouri for a period not to exceed 2
years.  The manufacturer in violation will also be required to
pay court costs and attorney fees resulting from the prosecution
of the violation by the Attorney General.

The substitute has an emergency clause and will be effective on
the later of the date of its approval by the Governor or July 1,
1999.

FISCAL NOTE:  No impact on state funds.

PROPONENTS:  Supporters say that the state can protect the
payments that it will receive under the terms of the Master
Settlement Agreement from the nonparticipating manufacturer
adjustment by passing the Model Statute exactly as specified in
the settlement agreement.  This adjustment, which will occur if
participating manufacturers lose market share to
nonparticipating manufacturers, could reduce the payments the
state will receive to 0 if the Model Statute is not enacted.
Even if the Model Statute is invalidated by the courts, a
state's payments could not be reduced by more than 65%.  Passing
the Model Statute is a form of insurance against reduction of
the projected billions that Missouri will receive from the
tobacco settlement.

Testifying for the bill were Representative Smith; Office of the
Attorney General; Philip Morris Management Company; and Capital
City Task Force of the American Association of Retired Persons.

OPPONENTS:  There was no opposition voiced to the committee.

Analyst:  Darrell Jackson, Director of Research

HB 814 -- Tobacco Settlement Model Statute

Co-Sponsors:  Smith, McLuckie

This bill enacts the model statute as prescribed in the Master
Settlement Agreement entered into by the state of Missouri and
leading United States tobacco product manufacturers on November
23, 1998.

The model statute requires any tobacco product manufacturer
which chooses not to enter into the master settlement agreement
to establish an escrow account and annually deposit amounts into
the account based on the number of tobacco units sold by the
manufacturer in Missouri.  Funds held in the escrow account may
be released only to pay judgments or settlements from claims
brought against the manufacturer by Missouri or by a party
located in Missouri.  Provisions allow for payment of interest
on escrow deposits and for release of certain excess deposits.
Twenty-five years from the date of deposit, deposits will be
released from escrow and returned to the manufacturer who made
them.

Any manufacturer that fails to make the required deposits into
the escrow account will be required to come into compliance with
provisions of the escrow compliance within 15 days of the
violation.  The court may impose a civil penalty upon the
manufacturer in violation in an amount of 5% of the required
deposits per day not to exceed 100%.  In the case of a knowing
violation, the penalty is 15% per day not to exceed 300%.  In
the case of a second knowing violation, the manufacturer will be
prohibited from selling tobacco products in Missouri for a
period not to exceed 2 years.  The manufacturer in violation
will also be required to pay court costs and attorney fees
resulting from the prosecution of the violation.