XII.4 Montana Tobacco Settlement Trust Fund

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Section 4. Montana tobacco settlement trust fund. (1) The legislature shall dedicate not less than two-fifths of any tobacco settlement proceeds received on or after January 1, 2001, to a trust fund, nine-tenths of the interest and income of which may be appropriated. One-tenth of the interest and income derived from the trust fund on or after January 1, 2001, shall be deposited in the trust fund. The principal of the trust fund and one-tenth of the interest and income deposited in the trust fund shall remain forever inviolate unless appropriated by a vote of two-thirds of the members of each house of the legislature. (2) Appropriations of the interest, income, or principal from the trust fund shall be used only for tobacco disease prevention programs and state programs providing benefits, services, or coverage that are related to the health care needs of the people of Montana and may not be used for other purposes. (3) Appropriations of the interest, income, or principal from the trust fund shall not be used to replace state or federal money used to fund tobacco disease prevention programs and state programs that existed on December 31, 1999, providing benefits, services, or coverage of the health care needs of the people of Montana.

History

C-35 was a constitutional amendment proposed by the 1999 Legislature to dedicate at least 40% of Montana’s annual tobacco settlements to a permanent trust fund, 90% of the interest earned from which would fund health care services and preventative programs for tobacco related illnesses, and 10% would remain forever inviolate without a 2/3 vote of both houses of the legislature.Governor’s Office of Budget and Program Planning, Governor’s Budget: Fiscal Years 2018-2019, LEG.MT.GOV, 7-5 (2015) http://leg.mt.gov/content/Committees/Interim/2015-2016/Revenue-and-Transportation/Meetings/Nov-2016/obpp-volume-2.pdf (last visited April 1, 2018). Today, this permanent trust fund is housed in Section 4 of Article XII of the Montana Constitution.MONT. CONST. art. XII, § 4.

The Statutory Tobacco Settlement Trust Fund

The statutory tobacco settlement trust fund was established in 1999, as part of a Master Settlement Agreement (MSA) between 46 states and the tobacco industry.Randy Torrijos & Stanton A. Glantz, Tobacco Control Policy Making in Montana 1979-2005: Falling Off the Horse at the Finish Line, UC SAN FRANCISCO, 35 https://cloudfront.escholarship.org/dist/prd/content/qt2rj5f9cr/qt2rj5f9cr.pdf (last visited April 1, 2018) Payments from the MSA would be deposited annually into Montana’s statutory trust, and were estimated to total $922.1 million through 2025.Id. In 1999, the first payment of $10.5 million was deposited into the statutory trust, which was closely followed by 14 separate pieces of legislation in the 1999 Legislative Session to appropriate or preserve the settlement funds.Id. Most of the bills would appropriate the funds for Medicaid services, tobacco disease services and prevention programs, for children’s healthcare, or for the general fund.Mont. Legislative Branch, Montana Legislature: Index of Introduced Bills, LAWS.LEG.MT.GOV (56th Leg. Reg. Sess. 1999) http://leg.mt.gov/css/Sessions/56th/bsindex.asp (last visited April 1, 2018). One notable outlier was a proposal to divest $100 million of the settlement funds for a grant for an interpretive center and museum in northeastern Montana – short titled “Use tobacco settlement for dinosaur museum at Fort Peck.”Mont. Legislative Branch, Montana Legislature: Detailed Bill Information, LAWS.LEG.MT.GOV (56th Leg. Reg. Sess. 1999) http://laws.leg.mt.gov/legprd/LAW0203W$BSRV.ActionQuery?P_SESS=19991&P_BLTP_BILL_TYP_CD=HB&P_BILL_NO=226&P_BILL_DFT_NO=&P_CHPT_NO=&Z_ACTION=Find&P_ENTY_ID_SEQ2=&P_SBJT_SBJ_CD=&P_ENTY_ID_SEQ= (last visited April 1, 2018). Only three of the bills appropriating MSA funds passed, one of which allocated $2 million to the Montana Comprehensive Health Association health insurance plans, a second appropriating $8 million from the MSA to establish the Children’s Health Insurance Plan (CHIP), and the General Appropriations Bill setting aside up to $30 million from the MSA for revenue stabilization in the general fund.Torrijos & Glantz, supra note 3, at 37-38; H.R. 2 (13), 57th Leg. Reg. Sess. (Mont. 2001).

The Constitutional Amendment Establishing the Tobacco Settlement Trust Fund

Proposals in the 1999 Regular Legislative Session

In addition to the 14 bills proposing appropriations of the MSA funds, SB 323 of the 1999 Legislative Session was the first attempt to ballot a constitutional amendment for a permanent tobacco settlement trust fund.S. 323, 56th Leg. Reg. Sess. (Mont. 1999). Proponents of SB 323 testified to the current illusory nature of the statutory trust, because it could be “raided” by a simple majority of the legislature, whereas a permanent, constitutional trust fund would require two-thirds of both houses before any “raiding” could occur.Torrijos & Glantz, supra note 3, at 43. The Attorney General, Joe Mazurek, further argued that “raiding” of statutory trusts was a common occurrence, and a permanent, constitutional trust was necessary to protect the settlement funds.Id. The Chair of the House Appropriations Committee, Tom Zook, advocated against SB 323, stating that the amendment would render “a large amount of money unavailable for future government programs” and that "the more flexibility you allow your future legislators, the better off you'll be.”Id. At third reading, the House vote on SB 323 was tied 50 to 50, failing to meet the ¾ vote requirement to be balloted.Id.

Proposals in the 2000 Special Legislative Session

At the 2000 Special Session, however, two senate bills were introduced to create a constitutional tobacco trust fund, but for two purposes. SB 12 would establish a constitutional tobacco trust fund to fund Medicaid programs, while SB 13 would establish a constitutional tobacco trust fund to fund health care programs generally.S. 12, 56th Leg. Spec. Sess. (Mont. 2000); S. 13, 56th Leg. Spec. Sess. (Mont. 2000). An additional difference between the bills was the location of the amendment within the Constitution. SB 12 would place it Article VIII, the Revenue and Finance section, while SB 13 would place it in Article XII, the brief “Departments and Institutions” section establishing the legislature’s obligations towards the Department of Agriculture, the Department of Labor and Industry, and other “institutions and facilities as the public good may require” and permitting the legislature to “provide such economic assistance and social and rehabilitative services for those … in need.”Id.; MONT. CONST. art. VIII; MONT. CONST. art. XII, §§ 1-3.

SB 12, sponsored by Senator Bob Keenan, passed the Senate on 2nd and 3rd reading unanimously, but faced consistent opposition in the House, passing 2nd and 3rd reading 76 to 12, and the motion carrying by 74 to 24, thus meeting the required 2/3 threshold for balloting, but the bill died in process. Mont. Legislative Branch, Montana Legislature: Detailed Bill Information, LAWS.LEG.MT.GOV (56th Leg. Spec. Sess. 2000) http://leg.mt.gov/css/Sessions/Special%20Session/may_2000/bills/sb0012.asp (last visited April 1, 2018). SB 13, also sponsored by Senator Bob Keenan, received fewer votes than SB 12, passing the Senate at 3rd reading 45 to 5, and the House at 3rd reading 69 to 24, meeting the 2/3 threshold for balloting as C-35 by a mere three votes.Mont. Legislative Branch, Montana Legislature: Detailed Bill Information, LAWS.LEG.MT.GOV (56th Leg. Spec. Sess. 2000) http://leg.mt.gov/css/Sessions/Special%20Session/may2000/bills/sb0013.asp (last visited April 1, 2018).

Ratification

The voter information pamphlet’s argument for the C-35 stated that 40% was approximately $12 million of Montana’s settlement payments, and over the next 25 years, Montana’s tobacco settlements were projected to generate $800-900 million.Sec.y of State, Voter Information Pamphlet, SOS.MT.GOV, 14 (2000) http://sos.mt.gov/Portals/142/Elections/archives/2000s/2000/2000_VIP.pdf?dt=1524166553994 (last visited April 1, 2018). The argument against C-35 in the voter information pamphlet stated that C-35 would impair the legislature’s ability to remain flexible to satisfy health costs and tobacco prevention education, explaining that “[t]he Constitution should remain a structured outline and not become a micro-managing document of time sensitive ideas.”Id. at 15. The opposing argument further asserted in its rebuttal to the proponent’s rebuttal that the purpose of the statutory tobacco settlement fund was to reimburse individuals for the health costs associated with tobacco use, and a permanent trust fund would withhold 40% of that funding for education and prevention purposes – thus depriving the taxpayers currently harmed by tobacco use.Id. at 16.

A poll conducted by Lee Montana Newspapers found that 76% of voters supported C-32 and only 11% opposed the amendment as of May, 2000.Erin Billings, No to Gambling Ban; SSNs; Yes to Tobacco Trust Fund, Missoulian, May 29, 2000. The poll’s projections were not far off, and C-35 passed the electorate in the November 2000 General Election with 73% voting in favor and 27% voting against.Sec.y of State, Voter Information Pamphlet, supra note 19 at 8. The following election, I-146, a citizen’s initiative passed the electorate. I-146 required 40% of all MSA payments after June 30, 2003 to be deposited in the permanent trust fund, 32% into a special revenue account dedicated to tobacco use prevention, 17% into a special revenue account for children’s health insurance, and 11% into the general fund.Governor’s Office of Budget and Program Planning, supra note 1 at 7-5; Sec.y of State, Voter Information Pamphlet, sos.mt.gov, 36-37 (2002) http://sos.mt.gov/portals/142/Elections/archives/2000s/2002/2002_VIP.pdf?dt=1524335461834 (last visited April 1, 2018). For Fiscal Year 2019, the payments from the MSA are projected to be as follows: $9.091 million to the permanent trust fund, $7.272 million to the special revenue account for tobacco use prevention, $3.863 million to the special revenue account for health insurance, and $2.5 million to the general fund.Governor's Office of Budget and Program Planning, supra note 1 at 77. Since its creation, there have not been any bills introduced to appropriate the principal of the permanent tobacco settlement trust fund.

Senate Bill 12

Section 1. Article VIII of The Constitution of the State of Montana is amended by adding a new section 17 that reads:

Section 17. Montana tobacco litigation settlement fund -- appropriation for health care purposes -- deposit in general fund. (1) The legislature shall create a fund for deposit of proceeds of the tobacco litigation settlement. Forty percent of the proceeds of the settlement must be deposited in the fund created by the legislature, and sixty percent of the proceeds must be deposited in the state general fund. (2) Subject to subsections (3) through (5), the legislature shall appropriate the money in the fund created pursuant to subsection (1) and the interest or other earnings on that money for the purpose of paying increased compensation, as determined by the legislature, for health care services provided as part of the Montana medicaid program. (3) If money remains in the fund that has not been appropriated pursuant to subsection (2), the legislature may, upon a two-thirds vote of the members of each house, appropriate the remaining money and interest or other earnings on that money for other health care purposes for which federal matching funds are available. (4) If money remains in the fund that has not been appropriated pursuant to subsections (2) and (3), the money must be retained in the fund for future appropriation as provided in this section. (5) Subject to subsections (2) and (3), money appropriated from the fund may not be used to replace state or federal money used to fund benefits, services, or coverage of the health care needs of the people of Montana that existed on December 31, 1999.

Senate Bill 13

Section 1. Article XII of The Constitution of the State of Montana is amended by adding a new section 4 that reads: