Ohio's use of tobacco trust funds put on hold

2/11/2009

COLUMBUS - Gov. Ted Strickland and Ohio lawmakers were probably out of bounds last year when they dissolved the state's endowment for anti-smoking programs and confiscated the $270 million in its coffers, a Franklin County judge said yesterday.

Common Pleas Court Judge David Fais issued a preliminary injunction to prevent the Strickland administration from spending most of that money to help underwrite a $1.57 billion economic stimulus package enacted last year.

The judge said in his preliminary ruling that lawmakers cannot revoke what amounted to an irrevocable trust they created to help Ohio smokers kick the habit and prevent other citizens, particularly youths, from starting the habit.

"Having established the endowment fund as a trust eight years ago, the state does not now have the power to revoke the trust because it did not reserve any right of revocation when the trust was created," Judge Fais wrote.

He indicated he believes those who challenged the state's actions, including a relapsed

Toledo smoker, are likely to prevail when their case goes to trial as scheduled on April 14. Should the judge ultimately rule against the state, it's unclear how it would retroactively affect a foundation that no longer exists even if its money does.

The Democratic governor struck a deal with Republican legislative leaders in April on the job-creation package, instructing the independent Ohio Tobacco Prevention Foundation to turn over $230 million of its $270 million endowment to help pay for it.

That would have left the foundation with just $40 million, less than its annual budget for its youth anti-smoking campaign and grants for smoking cessation and treatment programs.

The Ohio foundation's trustees balked and voted to transfer $190 million of the funds to the Washington-based American Legacy Foundation in exchange for a promise the money would be spent to further anti-smoking efforts in Ohio.

That prompted a swift reaction from the governor and the General Assembly to pass a law dismantling the foundation and confiscating the entire $270 million.

"I believe that the foundation acted illegally when it took resources that rightfully belong to the people of the state of Ohio and transferred those resources to an out-of-state entity," Governor Strickland said yesterday.

"I also believe that a court should act expeditiously in reaching these conclusions.

"Months have passed while these resources have not been available to benefit the people of Ohio," the governor said.

"I would ask that the court move on, reach a final decision, and, if necessary, give us an opportunity to appeal that decision."

The Legacy Foundation, which has a similar anti-smoking mission, contended it had a binding contract for the money. Judge Fais disagreed, determining that the vote to transfer the money was invalid because the discussions leading up to it took place behind closed doors in violation of the state Open Meetings Law.

But Judge Fais went a step further to find that confiscating the funds was improper in the first place once the settlement dollars had been turned over to the Ohio foundation.

Although the judge did not agree its contract was valid, the Legacy Foundation applauded the judge's ruling.

"We are absolutely delighted," said foundation attorney Ellen Vargas.

"This was our purpose from the beginning, to keep the money in Ohio for the purpose for which it was originally intended The judge issued a very straightforward decision," she said.

"The state put the money into an irrevocable trust, and there that money must stay to be spent for that purpose," Ms. Vargas said.

The size of the foundation's endowment, still protected in the Ohio Treasury, has been reduced by roughly $20 million. Judge Fais allowed the Ohio Department of Health to siphon off some of the money to keep some of the foundation's programs operating while the case has been in court.

Bob Miller, 51, of Toledo, one of the plaintiffs in the case, has been in and out of smoking-prevention programs at St. Luke's Hospital that were supported by the foundation. He has relapsed again and is counting on programs like that being there as a support system when he needs it.

"I participated and quit [smoking], then I relapsed and quit again, both times with St. Luke's," he said.

"In watching people in the program, in many cases they're longtime smokers in their 50s or 60s and on fixed incomes.

"Like myself, there are also many people who end up coming back into the program.

"It's amazing to me the success rate they get with these programs," Mr. Miller said.

Contact Jim Provance at:

jprovance@theblade.com

or 614-221-0496.