The tobacco fee: State justices to decide budget question
The fate of tax relief, more school funding and other state spending options rests in the hands of six Minnesota Supreme Court justices. They asked an attorney representing major cigarette makers tough questions Tuesday as he tried to convince th...
The fate of tax relief, more school funding and other state spending options rests in the hands of six Minnesota Supreme Court justices.
They asked an attorney representing major cigarette makers tough questions Tuesday as he tried to convince them to overthrow a 75-cent-a-pack fee. The estimated $370 million the fee would dump into the current budget is the difference between the state having some loose change or nearly empty pockets.
Attorney Stephen Patton told justices the fee violates a 1998 deal then-Attorney General Hubert "Skip" Humphrey made with the cigarette companies he represents. But Justice Alan Page said he doesn't see why the companies sued the state.
"I guess I'm having a difficult time seeing what's the harm here," Page said.
Patton, a Chicago attorney, responded: "The harm, your honor, is a deal is a deal."
The exchange came from one of a series of harsh questions several justices asked Patton during a session lasting more than an hour.
The justices' decision will affect Minnesota's budget because without it, lawmakers have little extra money to spend in the state's two-year, $31 billion budget. Legislators are debating how to change the budget with such a big revenue question mark; some House Republicans want to send rebate checks to homeowners, other legislators want to increase school or other spending.
Justices gave no indication when they will decide the case.
The big cigarette companies - led by Phillip Morris and R.J. Reynolds and joined by smaller tobacco companies and distributors - sued the state, saying the cigarette fee violates the 1998 lawsuit settlement with Humphrey. They claim the Humphrey deal forbids the state from enacting any fee or tax under the guise of raising money to fund smoking-related medical claims.
Last summer legislators approved a proposal by Gov. Tim Pawlenty to establish the 75-cent-a-pack fee. While the money was to go into a health-care account to cover smoking-related expenses, about the same amount was to be taken out of that account and sent to school.
The money is being collected, but the state cannot spend it until the courts rule on the case.
Assistant Attorney General Brad Delapena said Patton is misreading the settlement. He said the settlement does not - and under the state Constitution cannot - prohibit legislators from enacting new taxes or fees.
"This case is about the meaning of a contract," Delapena said.
Justice Paul Anderson sounded like he agreed with Page's question about why the cigarette companies are in court.
"What's the beef here?" he asked. "Is there any monetary damage here to distributors and manufacturers?"
Patton and other cigarette lawyers did not claim they lost money due to the fee. It was just that the state broke its word not to penalize cigarette makers, they said.
The high court was missing Justice Sam Hanson, who excused himself from the case.
Since the 1998 settlement, cigarette companies have paid Minnesota $2.2 billion in exchange for the state not collecting other smoking-related damages from them.
During and after the legislative cigarette fee debate, much of the discussion was about whether the charge was a tax or a fee. Justices pressed Patton and Delapena on which word best describes the charge, but both attorneys said it doesn't matter. However, Pawlenty spokesman Brian McClung said the governor still opposes tax increases and would not favor passing a new bill that turns the fee into a general tax
(Don Davis covers the Legislature for Forum Communications)