Both Reeve and Becker described the agreement reached between STCP members in positive terms. Reeve called it “an incredible accomplishment.”However, there were some objections among STCP members as to the agreements reached between STCP members that lead to the agreement on the division of MSA funds. Becker said, “a lot of my counterparts across the country don’t understand why we only went for 10 percent. But we were very, very realistic. It was as much as we could have expected in a state like Virginia with our history with tobacco.”Becker was the regional lobbyist for AHA, working in Maryland, Virginia, and South Carolina, and felt that Virginia’s MSA funds agreement would be a model for those states as well.319 Some advocates, such as Donna Reynolds, communications director for the ALA in Virginia, wanted more money to be dedicated to tobacco control efforts. Reynolds was was concerned that the funding earmarked from the MSA was still less than CDC recommended funding levels for state tobacco control .However, she noted to the press that she had some hope that the 40% that had yet to be allocated would be dedicated in part to tobacco control in the next year. Ultimately, in 2004 as part of the Omnibus Tax Bill that raised the cigarette excise tax to 30 cents, the 40% of the MSA payments that Reynolds had desired to be used for tobacco control were to be deposited in the newly created Virginia Health Care Trust Fund ,commercial indoor farming to be used to provide medical services including but not limited to Medicaid payments. While tobacco control expenditures were not specifically prohibited, they were not required and as of 2010 no HCTF monies had been expended on tobacco control measures.
Events leading up to the Master Settlement Agreement began in 1994 when the Attorneys General of Mississippi and Minnesota sued Philip Morris, Brown & Williamson, Lorillard, and RJ Reynolds to recover Medicaid costs incurred as a result of tobacco-related illness. By 1996, five states had sued the tobacco industry. Eventually almost every state would sue the cigarette manufacturers, leading to the 46 state Master Settlement Agreement, which provided billions of dollars to the states and in which the industry agreed to some marketing restrictions. In 1996, Anthony Troy, the Tobacco Institute lobbyist and former attorney general, had asked Del. Ward Armstrong to introduce HB 1392.HB 1392 sought to expand the defenses available to a third party sued by the Department of Medical Assistance Services for recovery of Medicaid expenditures. It allowed these third parties to use defenses normally available only to individuals, not corporations. Health advocates claimed that this language would bar the Virginia Attorney General from suing the tobacco industry to recover Medicaid expenditures.Business groups such as the Virginia Manufacturers Association, the Virginia Chamber of Commerce, and the Virginia Agribusiness Council, all tobacco industry allies, supported the legislation.Troy claimed that “Not just tobacco companies, but any company ought to be able to raise any common law defense that currently exists.”He did, however, acknowledge that the legislation was spurred by the lawsuits against the industry in other states.Despite industry denials, health groups and the media maintained that the bill would protect the tobacco industry from lawsuits regarding Medicaid by effectively barring the Virginia Attorney General from joining other states in suing the tobacco industry to recover Medicaid expenditures.
HB 1392 passed both houses of the legislature and was signed by Gov. George Allen in April. In March 1996, it was announced that cigarette manufacturer Liggett Group was settling with four states , the first time any cigarette manufacturer had settled smoking and health litigation. This settlement added substantial momentum to the states’ efforts to pursue the industry. In response, Virginia Attorney General James Gilmore announced to the press that Virginia would not sue the tobacco companies. Anti-smoking advocates charged that the tobacco lobby was responsible for the decision, to which a Gilmore spokesperson replied, “There are five states doing this, and there are 45 that are not doing this. There is nothing political going on.”However, when fundraising for his future 1998 gubernatorial bid, Gilmore made headlines by flying on a Philip Morris plane to a Republican event that raised $50,000; by March 30, 1997, Gilmore had raised $86,000 from tobacco industry contributions.Additionally, Gilmore opposed federal legislation giving the FDA power to regulate cigarettes during his bid to become governor, a position that drew fire from tobacco control advocates like the ACS and ALA of Virginia.Gilmore had also defended the decision not to sue the tobacco industry because tobacco manufacturing was a “key ingredient of the state economy” and that it would be wrong for the industry to be sued because of the “individual decisions of people” to use tobacco.Gilmore also held a significant amount of stock in Philip Morris, Inc., totaling approximately $42,000 in 1997.In June 1997, after the Liggett settlement made it apparent that lucrative payouts would be made to the states involved, the new Virginia Attorney General Richard Cullen and Governor Allen worked to assure that, despite non-participation in the litigation against the industry, Virginia might still receive payments from any settlement.
Allen appointed a three-member task force intended to work with the United States Congress, which at that point would have had to approve the proposed settlement because part of the original deal required immunity for the tobacco companies from most future legislation and other changes that required changes in the law.The goal of the task force was to minimize the impact of the settlement on the state’s tobacco industry; it included Cullen, Transportation Secretary Robert Martinez and Commerce and Trade Secretary Robert Skunda.Health advocates reacted negatively to the announcement, noting that Allen had not appointed the Secretary of Health and Human Services to the task force, but rather pro-tobacco-industry representatives.GASP executive director Hilton Oliver, speaking to the press, decried the focus on the livelihood of tobacco farmers rather than public health.A spokesman for the ALA of Northern Virginia agreed, saying to the media that “it’s a shame the public health community was ignored” in the composition and purpose of the task force.Due to controversy around the immunity provisions, the McCain bill died and the litigation continued in most of the rest of the country. After taking office as governor in 1998, Gilmore remained on the sidelines in terms of litigation. In May 1998, Gilmore reiterated his determination to stay out of the suit, and affirmed his support of the tobacco industry, saying that he opposed “any plan that adversely affects the Virginia economy.”However, when the second proposed settlement between states and the tobacco industry,industrial farming solutions referred to as the “Master Settlement Agreement” , was being finalized in late 1998, Gilmore’s Attorney General Mark Earley told the press that the administration was preliminarily in favor of participating in it even though Virginia had not filed suit because there was potential for the states to win substantial cash payouts from the industry. Earley sentseveral aides to New York, where settlement negotiations were being held, to monitor the situation.Virginia tobacco control advocates expressed concern that the settlement monies would be appropriated for uses other than public health, such as transportation or education. However, some advocates, such as Carter Steger of the ACS and STCP, hoped that some of the funds would go to compensate tobacco farmers.When the final version of the MSA was negotiated in November 1998, non-signatory states were given 30 days to join or miss out on the payments. The next month, Earley and Gilmore announced their intention to file a suit in Virginia in order to secure a projected $4 billion for Virginia over the first 25 years of the settlement. Virginia was one of four tobacco-growing states to file suit so that they could join the MSA during this grace period so they could get some of the money. At the last minute on November 19, 1998, James Feinman, who was a Lynchburg attorney and a previous General Assembly candidate, filed a motion to block Virginia from participating in the MSA, arguing that the settlement would interfere with suits that he had filed on behalf of lung cancer victims against the industry. A federal judge rejected the motion.
Gilmore and Earley then had until noon on November 20 to accept or reject the settlement. Ultimately, Gilmore agreed to participate, which meant that subsequently the General Assembly would enact legislation to determine how the MSA payments were to be allocated.HB 2635 and the identical SB 1165, approved by the General Assembly in March 1999, created both the Virginia Tobacco Settlement Foundation as well as the associated Virginia Tobacco Settlement Fund in which MSA funds were deposited. HB 2635 also created the Tobacco Indemnification and Community Revitalization Commission . The initial legislation allocated 10% of the MSA funds to the VTSF, and 50% to TICRC. Both VTSF and TICRC were political subdivisions of the Commonwealth193. HB 2635 was sponsored by Del. Whittington W. Clement and SB 1165 was sponsored by Sen. Charles R. Hawkins . The bills grew out of discussions between health advocates and farmers, who had met as part of the STCP in late 1998 to discuss what to do with the money that Virginia expected to get from the MSA. There was a decided emphasis by legislators and health advocates on the plight of farmers, with the sponsor of one of the bills, Sen. Hawkins, stating that “our farmers face their greatest crisis since the founding of Virginia.”The bills were supported by the Virginia Farm Bureau, the National Black Farmers Association, and the Virginia chapters of ACS, ALA, and AHA.After passing both houses, Republican Gov. Jim Gilmore expressed his reservations about the bills as written and refused to sign them unless amendments he proposed were accepted. As introduced, the bills called for the governing boards of both VTSF and TICRC to be primarily appointed by either the Speaker of the House or the Senate Privileges and Elections Committee. The amendments increased the governor’s role to appointing nineteen out of twenty three members of the two governing boards.In addition, the governor’s amendments also made VTSF’s and TICRC’s funds non-reverting in an attempt to discourage future governors and legislatures from using the funds for other purposes.The governor’s recommendations were incorporated into the bills, passed again and were signed into law in April 1999. Board members are appointed for four-year terms. shows the members in 2010.The Board was charged with establishing the criteria for the distribution of money from the VTS Fund, specifically “for use in discouragement, elimination, or prevention of the use of tobacco products by minors.”Furthermore, distribution of money from the Fund was predicated on the adoption of a policy by the recipient organization or entity to restrict the use of tobacco by minors. The Board was also charged with assuring that the recipient organization or entity has policies that comport with the Board’s established guidelines. VTSF is a political subdivision of the Commonwealth, not a state agency. At its inception, there was a significant amount of confusion among members of the Board as to the powers of the VTSF and its ability to distribute funds, as well as its relationship to the governor and legislature.It was eventually determined that VTSF had the ability to distribute funds out of its operating fund, but that the governor and legislature through the budget process could control the amount of money available to VTSF.While the formation of VTSF had occurred during the Fall 1999, it took more than a year for the foundation to form a specific plan to combat youth smoking. By early 2001, VTSF had only spent about $1 million of the approximately $16 million allocated annually from the MSA for VTSF efforts, although the governor’s own figures put the amount at closer to $200,000.In response to the fact that it was taking time to set the program up, in early 2001 Gov. Gilmore announced a proposal to reduce VTSF funds because he was “perplexed as to why the money that was previously allocated was not spent,” according to a spokesperson for the governor.This left the VTSF with confusion about how the board should proceed, with the Gilmore-appointed chairperson, Clarence Carter, cautioning the board against “fighting the administration” and championing a resolution to the funding issue.