COLUMBUS - A state appeals court yesterday said Ohio can confiscate some $258 million in tobacco settlement funds it had initially set aside nearly a decade ago exclusively for anti-smoking programs.
The decision, which continues to protect the funds pending another possible appeal, overturned a Franklin County Common Pleas Court ruling preventing the state from taking the money for other purposes. Gov. Ted Strickland applauded the decision. If allowed to stand, the lower court ruling would have left a gaping hole in the state's current budget.
"Today's unanimous ruling by the 10th District Court of Appeals reaffirms our position that it is within the authority of the governor and general assembly to appropriate and expend state resources in line with the state's funding priorities," he said. "Among those priorities are providing access to children's health care and critical health services for adult Ohioans.''
A three-judge panel of the Columbus-based 10th District Court of Appeals unanimously disagreed with the lower court's contention that the state had created an irrevocable trust that even it could not break. The Ohio Tobacco Prevention Foundation was created using money from the state's share of a multi-billion-dollar national settlement with major tobacco companies.
The appeals court unanimously found that even though the money had been intentionally segregated from other funds in the state treasury, the state had not surrendered its right to change its mind about how to spend it.
"States desiring to permanently restrict the use of their tobacco settlement money have done so expressly through constitutional amendments,'' the court wrote. "Ohio has never promulgated a constitutional amendment restricting the use of its tobacco settlement funds. Accordingly, the General Assembly retained its power to legislate with regard to those funds.''
As part of a $1.57 billion job-creation package in 2008, Mr. Strickland and Republican legislative leaders agreed to use $40 million of what was then a $230 million endowment in the tobacco trust fund to invest in biomedical and biotechnical research.
That prompted the foundation's board to vote to transfer $190 million the American Legacy Foundation, a Washington-based organization with a similar anti-tobacco mission. An angry governor and legislature then voted to dismantle the foundation and confiscate all of its funds. The American Legacy Foundation and several Ohio smokers sued.
Ellen Vargyas, the Legacy Foundation's attorney, said she was glad to see that the court preserved the funds while a decision is made as to whether to seek another appeal.
"Ohio and other states received these funds to compensate them for their expenses in health care for tobacco-related disease,'' she said. "We've always said that Ohio did something very wise not quite 10 years ago to dedicate funds to saving lives.''
As the economy tanked, the governor and lawmakers changed their minds this year about how to spend the money. They earmarked the monies in the current budget to continue funding for county adult and child protective services, optional Medicaid programs like adult dental care, and expanded health care coverage for children.
"One of the things that has been most alarming is the increase we've seen in the number of children coming into care between the ages of zero and 4 because of the pressures from the economy,'' said Gayle Channing Tenenbaum, an advocate for children's social service programs. "Families are having trouble providing, and this will really help to take some of the pressure off being able to support these families.''
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