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NH tobacco cash proves a windfall

State House Bureau

April 24. 2013 9:58PM

CONCORD - The state received a little manna from heaven Wednesday - about $15 million - and is expecting a little more in the next few days, money the governor wants to use to reduce the fiscal 2013 budget deficit.

The cash is the result of a recent settlement with tobacco companies. Lawmakers were expecting the money during the next fiscal year, and House budget writers have included $23.1 million of it in the proposed two-year operating budget passed earlier this month.

"The timely receipt of the tobacco settlement funds is a positive development in our efforts to address New Hampshire's fiscal challenges in a responsible manner," said Gov. Maggie Hassan.

The state faces a $14 million to $20 million deficit for the 2013 fiscal year, which ends June 30, due to shortfalls in Medicaid Enhancement Tax payments by hospitals, unbudgeted expenditures such as additional money for charter schools, a settlement with the federal government to repay uncompensated care funds and savings from managed care in the Medicaid program that have not been realized.

"These dollars will be key to addressing the projected fiscal year 2013 deficit, and could help eliminate the need for alternative plans under consideration," Hassan said.

The House budget allowed Hassan to use dedicated funds such as the renewable energy fund to offset the current-year deficit.

The settlement by New Hampshire and 19 other states resolves 10 years of litigation with the major tobacco manufacturers, who claimed the state did not "diligently enforce" the 1998 master agreement that has netted the state between $42 million and nearly $50 million a year.

This fiscal year, New Hampshire received $42 million. The first $40 million of the tobacco settlement money goes into the education trust fund to pay for state adequacy grants to school districts. The rest goes into the state's general fund.

The major tobacco companies, claiming 35 states did not force the non-participating tobacco companies to pay into an escrow account as required, withheld about $4 million a year from payments to the state for about a decade.

As a result of the settlement, the state will receive $57.3 million, about $15 million more than what was budgeted for fiscal year 2013. Associate Attorney General Richard Head said the state expects to receive additional money in the next few days, but could not say how much.

The funds received by New Hampshire Wednesday represent a little more than 50 percent of the money the tobacco companies had held in an escrow account.

Speaking to lawmakers earlier this year, Deputy Attorney General Ann Rice said the state was risking all of the money it receives from the tobacco companies by pursuing the suit. By reaching a settlement, the state saves the cost and time of a trial, Rice said.

Lawmakers fast-tracked a bill last month so the state could sign on to the new settlement.

The state receives about 50 cents from the tobacco companies for every pack sold in New Hampshire.

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