ALBUQUERQUE (KRQE) - The state could face a multimillion-dollar penalty in funds supposed to help the most vulnerable New Mexicans because of a mistake made a decade ago.
Each year, states receive payment from big tobacco companies to help cover medical costs of treating patients suffering from smoking-related illnesses and to support various research programs. The money comes from the 1998 Master Settlement Agreement (MSA) that resolved lawsuits against the companies.
New Mexico gets around $40 million from the big tobacco companies that is funneled into the state's Tobacco Settlement Permanent Fund. Half of the money is then allocated to the Tobacco Settlement Program Fund and spent on programs like UNM's Cancer Center and the Department of Health's breast and cervical cancer screening.
But New Mexico could see up to a $10 million reduction, possibly more, for next year, according to Assistant Attorney General Ari Biernoff.
In exchange for big tobacco's payments, the MSA called for states to regulate smaller tobacco companies not part of the settlement by forcing them to turn over a share of their profits into separate bank accounts in order to level the playing field. But an independent arbitration panel made up of three retired federal judges ruled in favor of big tobacco companies last month saying New Mexico did not enforce those laws regulating smaller companies in the year 2003.
As a result, New Mexico will see a large reduction in tobacco settlement payments a decade later.
Biernoff said it was too early to pinpoint exactly how much of a reduction New Mexico will face, but he said the cuts could continue for years to come. Biernoff said New Mexico did not significantly change its practices in regulating companies in 2004, 2005, up until last year.
"Future years, we expect, will be the subject of dispute," Biernoff said.
The result would be tens of millions of dollars in cuts to programs helping treat people with cancer and other deadly diseases.
According to Biernoff, the arbitration panel said New Mexico did not try hard enough to regulate smaller tobacco companies.
"None of the states had a 100 percent success rates," Biernoff said. "This was a new law (in 2003) that had only been on the books for a few years. I think the states were still working the best ways, the most efficient ways, the most effective ways to enforce these laws."
But Biernoff said the punishment New Mexico faces does not match the grievance.
"We didn't regulate such a small number of cigarettes that we were supposed to regulate. They don't even fill up a single trailer truck," Biernoff said.
Biernoff adds the amount those companies should have set aside in 2003 totals $100,000.
"For a shortfall around $100,000, we're facing a penalty that's in the many millions of dollars," Biernoff said.
Rep. Gail Chasey, D-Albuquerque, was chairwoman of the Tobacco Settlement Revenue Oversight Committee in 2003. She said the Legislature, the attorney general and the administration should take responsibility for the penalty.
But Chasey said no one in New Mexico could have predicted how far big tobacco would take the fine print of the settlement.
"Perhaps we didn't realize the rigorous requirements we were under," Chasey said. "I wish we knew the extent to which we were going to have to prove these efforts.
"If it ends up being a $10 million cut or more, that's going to affect us, and it's going to be very devastating."
Doctors at the forefront of cancer research and treatment at the University of New Mexico's Health Sciences Center echo that sentiment.
"We would be severely hurt with a cut in funding," Dr. Martin Edelment said. "These are everyday people. There's no distinction when it comes to who gets diseases."
That couldn't ring more true for Emma Kotobi and her family. Kotobi's father died from lung cancer two years ago. Her mother was diagnosed with lung cancer in August.
"They were both smokers. They both smoked most of their life," Kotobi said. "People hear about, you know, smoking can cause lung cancer and stuff like that, but it doesn't happen to everybody, and I think we kind of feel like it's not going to happen to us."
"The tobacco industry is not doing nearly enough for what they're doing to New Mexicans," Biernoff said. "And even then, they're trying to take back some of the money, and that's why we're fighting this."
Biernoff said the attorney general is still reviewing the ruling to see if the state will challenge the penalty. He said reversing in arbitration ruling is more difficult than a judge's ruling.
Tobacco Settlement Program Fund Appropriations for FY 14 (July '13 - June '14)
For FY 2014, New Mexico received $39.3 million from the Tobacco Settlement. Roughly half of that is funneled into the Tobacco Settlement Program Fund to fund the following programs:
|Indian Affairs||Tobacco Cessation Programs||$249,300.00|
|Human Services Dept.||Medicaid - Breast & cervical cancer treatment||$1,312,400.00|
|Human Services Dept.||Medicaid||$7,907,300.00|
|Department of Health||Tobacco cessation & prevention||$5,682,000.00|
|Department of Health||Diabetes prevention & control||$748,000.00|
|Department of Health||HIV/AIDS services||$293,000.00|
|Department of Health||Breast & cervical cancer screening||$128,600|
|Children, Youth and Families||Early childhood funding||$9,750,000|
|Higher Education Department||Transfer to lottery tuition fund & scholarships||$9,875,000|
|UNM Health Sciences Center||Instruction and general purposes||$607,900|
|UNM Health Sciences Center||Research in genomics & environmental health||$979,800|
|UNM Health Sciences Center||Poison control center||$590,200|
|UNM Health Sciences Center||Pediatric oncology program||$261,400|
|UNM Health Sciences Center||Specialty education in trauma||$261,400|
|UNM Health Sciences Center||Specialty education in pediatrics||$261,400|
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