In a 2005 special session, the Mississippi Legislature was on the verge of selling a significant portion of its future annual tobacco lawsuit settlement funds for an immediate sum of money when a single phone call from the powerful House speaker stopped the process.
Then-state Treasurer Tate Reeves, a Republican who is now in his second term as governor, had explained to legislative leaders how the process to sell the future payments would work. Legislators initially bought into the concept of quickly getting a modest amount of cash rather than patiently waiting to collect a larger amount spread over decades.
Legislation “to securitize” a portion of the annual tobacco lawsuit funds passed the Senate. The bill was expected to pass the House Appropriations Committee and ultimately the full House when Speaker Billy McCoy made a phone call to Appropriations Chairman Johnny Stringer minutes before the committee met.
One version of the story is that McCoy informed his money chairman that he was withdrawing his support for the proposal, and another version is that McCoy told Stringer point-blank not to pass the bill. The story further goes that McCoy made the pivotal phone call after a meeting with Gulf Coast Rep. Diane Peranich, one of his key allies, who voiced strong opposition to securitization.
At any rate, after that call, Stringer killed the bill.
The only problem was that the Legislature still had to deal with a whopping $268 million Medicaid deficit. Even by today’s inflationary standards, such a deficit would be significant. In 2005, it was near catastrophic.
There seemed to be no solution, and the Division of Medicaid was only days from being unable to pay medical providers.
The Democratic-controlled House wanted to increase the measly 18 cents per pack tax on cigarettes to address the deficit. The Senate aligned with Republican Gov. Haley Barbour, who had previously been a tobacco lobbyist, in opposing the cigarette tax increase. And to be honest, a cigarette tax increase on its own would not have generated enough revenue to solve the monumental Medicaid problem. Then, as now, most politicians considered a tax increase a nonstarter.
Seeing no solution, legislators left for the weekend on March 10. But before many of them got home, Barbour called them back in what was then a rare special session within the regular session.
In that special session, the securitization initially was viewed as both a smart business move and a way to solve the deficit.
Ultimately, instead of the securitization, legislators solved the deficit by making cuts to Medicaid and by withdrawing $240 million from the healthcare trust fund that was created with the tobacco lawsuit settlement funds.
The legislation included the caveat that the trust fund would be replenished.
That never happened. The trust fund no longer exists in any substantive manner.
Through a series of well researched stories and the “Black Box” podcast, Mississippi Today details how state and local politicians are starting to spend $430 million in opioid lawsuit settlement funds that the Mississippi will receive over many years.
Comparisons have been made to how the state has spent the tobacco lawsuit settlement money and how the state and local governments are currently spending the opioid lawsuit settlement funds. Both lawsuits were filed to obtain money from companies (tobacco and drug companies) for the harm they caused Mississippians.
The 1997 tobacco lawsuit settlement guaranteed Mississippi $4 billion over 25 years with annual payments, based on a formula, continuing forever. The most recent annual payment is about $90 million.
In 1999, the Legislature voted to place the annual settlement funds in a trust fund and use the earnings for healthcare initiatives. But not too long after the trust fund was established, a perennially cash-strapped Legislature and governor began to dip into it to deal with budget shortfalls.
Solving the Medicaid deficit in 2005 culminated that effort.
Many believe the end of the trust fund was a lost opportunity for the state to use the massive lawsuit to make a difference in healthcare.
It is hard to argue that it was not. But it also would be hard to argue in 2005 in favor of essentially shutting down the Medicaid program that provides healthcare for low-income people: children, pregnant women, disabled people and some of the elderly population.
For a Legislature afraid of tax increases, few other options existed.
The Legislature and governor are still adverse to tax increases and spend much of their time cutting taxes. But the opioid settlement comes on the heels of the state experiencing unprecedented revenue growth, thanks to a number of circumstances related to a massive influx of federal pandemic relief money.
While that growth has slowed, Mississippi’s financial situation is not nearly as bleak as it was in 2005, giving state leaders the opportunity to use the opioid settlement money for the intended purpose – to fight drug addiction.
If they do that, perhaps people won’t be talking about another lost opportunity a generation from now.
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