Sin taxes: When the state becomes the sinner

Temple Law Review

Volumn 82, Issue 4, 2009, Pages 1041-1070

  Haile, Andrew J ^a  

^a ELON UNIVERSITY   (United States)

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EID: 79251538927     PISSN: 08998086     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (240)

1. See Press Release, Ctr. on Budget & Policy Priorities, New Fiscal Year Brings Painful Spending Cuts, Continued Budget Gaps in Almost Every State (June 29, 2009), http://www.cbpp.org/files/6-29-09sfp-pr.pdf ("The total shortfall for fiscal year 2010-including gaps that have been addressed through budget cuts and other measures, and newly emergent gaps-now totals $166 billion across 48 states. Total gaps through 2011 will exceed $350 billion.").
2. See William F. Shughart II, The Economics of the Nanny State, in TAXING CHOICE: THE PREDATORY POLITICS OF FISCAL DISCRIMINATION 13, 20-24 (William F. Shughart II ed., 1997) (discussing historical use of sin taxes on such products as alcohol and tobacco to correct for negative externalities associated with use of such products). Although gambling has traditionally been included as a sin tax target, this Article will focus on the taxation of harmful products, particularly tobacco, rather than harmful activities such as gambling.
3. Sixteen states and Puerto Rico increased tobacco taxes during their 2009 legislative sessions. NAT'L GOVERNORS ASS'N & NAT'L ASS'N OF STATE BUDGET OFFICERS, THE FISCAL SURVEY OF STATES 61 (2009).
4. See Sewell Chan, A Tax on Many Soft Drinks Sets Off a Spirited Debate, N.Y. TIMES, Dec. 17, 2008, at A36 (discussing New York proposal to implement 18% "obesity tax" on sodas and juice drinks). The federal government is also considering whether to tax sodas as a means of financing health care reform.
5. See Janet Adamy, Soda Tax Weighed to Pay for Health Care, WALL ST. J., May 12, 2009, at A4 (stating that Senate Finance Committee was considering new soda tax to help fund heath care reform and that health advocates were also proposing legislation to "sharply raise taxes on alcohol, move to largely eliminate artificial trans fat from food and move to reduce the sodium content in packaged and restaurant food")
6. Soda Tax Proposal to Help Fund Health Care Reform Stirs Opposition, FOXNEWS.COM, June 3, 2009, http://www.foxnews.com/politics/2009/06/03/soda-tax- proposal-help-fund-health-care-reform-stirs-opposition (stating that Senate Finance Committee was considering "lifestyle tax" on soda and other sweetened drinks in order to help pay for health care reform).
7. Stephanie Gaskell, Adult Download Tax Proposal Awaits Climax in Albany, NYDAILYNEWS.COM, Feb. 16, 2009, http://www.nydailynews.com/ny-local/2009/02/15/ 2009-0215-adult-download-tax-proposal-awaits-clima.html.
8. Alison Stateman, Can Marijuana Help Rescue California's Economy?, TIME.COM, Mar. 13, 2009, http://www.time.com/time/nation/article/0,8599,1884956, 00.html. Health advocates have also previously proposed taxing fatty foods, but there have been no recent legislative proposals to implement such a tax.
9. Kelly D. Brownell, Op-Ed., Get Slim with Higher Taxes, N.Y. TIMES, Dec. 15, 1994, at A29.
10. Whether a state has an affirmative obligation to protect its citizens' health by regulating the use of harmful products is a matter of fundamental debate. The details of that debate need not be considered in this Article, however, because the moral hazard resulting from a state's dependence on sin tax revenues exists even if the state is subject only to the less controversial obligation of not profiting from the sale of harmful products to its citizens.
11. See U.S. GOV'T ACCOUNTABILITY OFFICE, GAO-07-534T, TOBACCO SETTLEMENT: STATES' ALLOCATIONS OF PAYMENTS FROM TOBACCO COMPANIES FOR FISCAL YEARS 2000 THROUGH 2005, at 3 (2007), available at http://www.gao.gov/new.items/d07534t.pdf (stating that infrastructure and education allocations from tobacco payments were among largest, after allocations for health care and budget shortfalls).
12. See Stephanie Saul, Government Gets Hooked on Tobacco Tax Billions, N.Y. TIMES, Aug. 31, 2008, at WK3 (discussing extent to which state and federal governments rely on revenue from taxes on tobacco).
13. A copy of the Master Settlement Agreement is available through the National Association of Attorneys General website at http://www.naag.org/ backpages/naag/tobacco/msa/msapdf/MSA%20with%20Sig%20Pages%20and%20Exhibits.pdf/ file-view. The Master Settlement Agreement is referred to and cited throughout this article as the "MSA."
14. See generally MSA § IX(d), at 58-76.
15. See Patricia Molteni, NAAG Tobacco Project: 11 Years of MSA Coordination, NAAGAZETTE, (Nat'l Ass'n of Attorneys Gen., Washington, D.C.), May 2009, at 3, 5 (discussing arbitration over payments made by MSA-participating cigarette manufacturers in 2004, which may require states to return up to $5.3 billion to those cigarette manufacturers).
16. See CAMPAIGN FOR TOBACCO-FREE KIDS, A DECADE OF BROKEN PROMISES: THE 1998 STATE TOBACCO SETTLEMENT TEN YEARS LATER, at i (2008) (finding that for fiscal year 2009 "no state is funding tobacco prevention programs at levels recommended by the U.S. Centers for Disease Control and Prevention"). Numerous studies have determined that smoking prevention and cessation programs are successful in reducing tobacco use.
17. See, e.g., INST. OF MED. OF NAT'L ACADS., ENDING THE TOBACCO PROBLEM: A BLUEPRINT FOR THE NATION 165 (2007) (confirming effectiveness of tobacco control programs in California and Massachusetts)
18. Matthew C. Farrelly et al., The Impact of Tobacco Control Programs on Adult Smoking, 98 AM. J. PUB. HEALTH 304, 306 (2008) (analyzing effectiveness of smoking control programs and finding that if CDC-recommended funding had been provided there would have been 2.2 to 7.1 million fewer smokers in the United States in 2003).
19. Alexander Hamilton cited fiscal and health benefits as justification for imposing a tax on whiskey shortly after the American Revolution. Brenda Yelvington, Excise Taxes in Historical Perspective, in TAXING CHOICE: THE PREDATORY POLITICS OF FISCAL DISCRIMINATION, supra note 2, at 31, 33 ("[T]he consumption of ardent spirits particularly, no doubt very much on account of their cheapness, is carried on to an extreme, which is truly to be regretted, as well in regard to the health and the morals, as to the economy of the community."
20. (quoting ALEXANDER HAMILTON, THE REPORTS OF ALEXANDER HAMILTON 34 (Jacob E. Cooke ed., Harper & Row 1964)) (internal quotation marks omitted)).
21. See Jendi B. Reiter, Citizens or Sinners?-The Economic and Political Inequity of "Sin Taxes" on Tobacco and Alcohol Products, 29 COLUM. J.L. & SOC. PROBS. 443, 461-68 (1996) (stating that revenue generation and cost mitigation arguments for sin taxes are discriminatory, unnecessary, and poor ways to advance smokers' and drinkers' well-being)
22. see also Rachel E. Morse, Note, Resisting the Path of Least Resistance: Why the Texas "Pole Tax" and the New Class of Modern Sin Taxes Are Bad Policy, 29 B.C. THIRD WORLD L.J. 189, 208-10 (2009) (discussing regressive nature of sin taxes).
23. See Shughart, supra note 2, at 24 ("The fact that [sin] taxes also raise revenue is in theory of secondary importance to the promotion of virtue. But revenue is never inconsequential to government in practice.").
24. See 1 CONG. BUDGET OFFICE, BUDGET OPTIONS: HEALTH CARE 193 (2008) ("Researchers estimate that each 10 percent increase in the price of cigarettes is likely to cause their consumption to fall by 4 percent to 6 percent (probably more in the case of teenagers).")
25. Badi H. Baltagi & Rajeev K. Goel, State Tax Changes and Quasi-Experimental Price Elasticities of U.S. Cigarette Demand: An Update, J. ECON. & FIN., Fall 2004, at 422, 427-28 (finding that 10% increase in cigarette price would decrease demand for cigarettes by a little over 3%). These elasticity trends have been confirmed by studies undertaken in other countries.
26. See, e.g., Office of Tobacco Control, Tobacco Control Economics: Overview, http://www.otc.ie/economics.asp (last visited Aug. 10, 2010) (describing demand elasticity for cigarettes and other tobacco products in Ireland as "relatively low at about 0.4 to 0.6").
27. See Baltagi & Goel, supra note 17, at 428 (stating that "revenue-generating potential of cigarette taxes remains strong" despite decrease in cigarette demand associated with such taxes).
28. CAMPAIGN FOR TOBACCO-FREE KIDS, supra note 13, at xi.
29. 43 ORZECHOWSKI & WALKER, THE TAX BURDEN ON TOBACCO: HISTORICAL COMPILATION, at iv (2008) (on file with author). The same study also estimates that the states received almost $4 billion in general sales tax revenues from the sales of tobacco products.
30. CONG. BUDGET OFFICE, supra note 17, at 192.
31. See CHUCK MARR & GILLIAN BRUNET, CTR. ON BUDGET & POLICY PRIORITIES, TAXING HIGHSUGAR SOFT DRINKS COULD HELP PAY FOR HEALTH CARE REFORM 2 (2009), http://www.cbpp.org/files/5-27-09health2.pdf ("A tax on high-sugar soft drinks would reduce consumption of such beverages⋯Lower consumption, in turn, would improve health outcomes.")
32. Kelly D. Brownell & Thomas R. Frieden, Ounces of Prevention-The Public Policy Case for Taxes on Sugared Beverages, 360 NEW ENG. J. MED. 1805, 1805 (2009) ("[A] tax on sugared beverages would encourage consumers to switch to more healthful beverages, which would lead to reduced caloric intake and less weight gain.")
33. Campaign for Tobacco-Free Kids, Higher Cigarette Taxes: Reduce Smoking, Save Lives, Save Money, http://www.tobaccofreekids.org/reports/prices/ (last visited Aug. 10, 2010) ("Increasing cigarette taxes is a WIN, WIN, WIN solution for governments-a health win that reduces smoking and saves lives; a financial win that raises revenue and reduces health care costs; and a political win that is popular with the public.").
34. See Ctrs. for Disease Control & Prevention, U.S. Dep't of Health & Human Servs., Response to Increases in Cigarette Prices by Race/Ethnicity, Income, and Age Groups-United States, 1976-1993, 47 MORBIDITY & MORTALITY WKLY. REP. 605, 605 (1998) ("[L]ower-income, minority, and younger populations [are] more likely to reduce or quit smoking in response to a price increase in cigarettes.").
35. See id. at 608 (reporting findings that smokers with family incomes below national median are significantly more likely to quit smoking because of price increases than those with higher incomes). Similar findings have been made in Ireland.
36. See Office of Tobacco Control, supra note 17 ("While elasticity [of cigarette demand] is comparatively low for higher income groups (0.2 to 0.3), it is quite high for lower income groups (0.8.). Young persons are also more sensitive to price than are adults.").
37. Brownell & Frieden, supra note 22, at 1806.
38. See id. ("In the case of sugared beverages, marketers commonly make health claims (e.g., that such beverages provide energy or vitamins) and use techniques that exploit the cognitive vulnerabilities of young children, who often cannot distinguish a television program from an advertisement.").
39. See Jeff Strnad, Conceptualizing the "Fat Tax": The Role of Food Taxes in Developed Economies, 78 S. CAL. L. REV. 1221, 1240 (2005) ("An ideal Pigouvian tax would equal, for each unit of consumption, the added marginal social cost caused by consumption of that unit."). A "Pigouvian tax" is a tax on externalities designed to use market forces to achieve an efficient allocation of resources.
40. Id. at 1244
41. See Frank J. Chaloupka & Kenneth E. Warner, The Economics of Smoking, in 1B HANDBOOK OF HEALTH ECONOMICS 1539, 1579-83 (Anthony J. Culyer & Joseph P. Newhouse eds., 2000) (summarizing issues relating to externalities associated with smoking)
42. Phineas Baxandall, Taxing Habits: When It Comes to State Taxes, Sin Is In, REGIONAL REV., Q1 2003, at 19, 22 (stating that in 2003, health care costs for smokers exceeded those for non-smokers by estimated $12,000 over life of individual).
43. Ctrs. for Disease Control & Prevention, U.S. Dep't of Health & Human Servs., Medical-Care Expenditures Attributable to Cigarette Smoking-United States, 1993, 43 MORBIDITY & MORTALITY WKLY. REP. 469, 470 (1994).
44. Patricia McBroom, $72.7 Billion: Smoking's Annual Health Care Cost, BERKELEYAN, Sept. 16, 1998, http://berkeley.edu/news/berkeleyan/1998/0916/ smoking.html.
45. Ctrs. for Disease Control & Prevention, U.S. Dep't of Health & Human Servs., Smoking-Attributable Mortality, Years of Potential Life Lost, and Productivity Losses-United States, 2000-2004, 57 MORBIDITY & MORTALITY WKLY. REP. 1226, 1228 (2008).
46. See Xiulan Zhang et al., Cost of Smoking to the Medicare Program, 1993, HEALTH CARE FINANCING REV., Summer 1999, at 179, 187 (estimating cost of smoking to Medicare program in 1993 at $14.2 billion)
47. Press Release, Univ. of Cal. Berkeley, Impact of Cigarette Smoking on Medicaid Costs is $322 Billion in 25 Years, Says University of California Analysis (Mar. 9, 1998), http://berkeley.edu/news/media/releases/98legacy/03- 09-98a.html (estimating cost of smoking to Medicaid program at approximately $12.9 billion per year).
48. See H.J. Cummins, The Popular but Paradoxical 'Sin Tax' Spurs Controversy, NEWSDAY, Jan. 31, 1993, at 77 (noting that proponents believe sin taxes are "a fair levy against people whose habits lead to such things as lung cancer and drunk driving accidents, expensive problems to society as a whole").
49. See infra Section II.B.4 for a discussion refuting the contention that smoking imposes a net cost on society.
50. Press Release, Am. Cancer Soc'y, Tobacco Control Ballot Initiatives Triumph Across the U.S. (Nov. 8, 2006), http://action.acscan.org/site/DocServer/ NA-News-Election-Results-Release-FINAL.pdf?docID=381.
51. Press Release, Campaign for Tobacco-Free Kids, Voters Increase Tobacco Taxes in Three States, Back Smoke-Free Air Measures Across the Nation, (Nov. 3, 2004), http://www.tobaccofreekids.org/Script/DisplayPressRelease.php3?Display= 795&zoom-highlight=Montana
52. see also Mark Mellman, Of Kids' Health Insurance and Tobacco Taxes, THEHILL.COM, Aug. 1, 2007, http://thehill.com/opinion/columnists/mark-mell man/8588-of-kids-health-insurance-and-tobacco-taxes (stating that polling showed "67% of voters favor a 75-cent increase in the federal cigarette tax, with the revenue dedicated to [State Children's Health Insurance Program], while only 28% oppose it").
53. Daniel B. Wood, State Initiatives: New Jersey Rejects Stem-Cell Research, Utah Axes Vouchers, CHRISTIAN SCI. MONITOR, Nov. 9, 2007, at 2.
54. Evan Halper, Election 2006; State Propositions: Interpreting the Vote-Losses Called Temporary Setbacks, L.A. TIMES, Nov. 9, 2006, at A30.
55. ELECTIONS DIV., SEC'Y OF STATE, CAL., STATEMENT OF VOTE 31 http://www.sos.ca.gov/elections/sov/2006-general/complete-sov.pdf.
56. Shughart, supra note 2, at 24-25.
57. See Tony Romm, Recession Ushers in More Tobacco Taxes, STATELINE.ORG, June 17, 2009, http://www.stateline.org/live/details/story?contentId=407272 (reporting federal hike in cigarette prices could cause state revenues from tobacco taxes to fall).
58. Heather M. Rothman & Brett Ferguson, Plan to Fund Health Reform with "Sin Taxes" Garners Minimal Support Among Lawmakers, 107 DAILY TAX REP. (BNA) No. 107, at GG-1 (June 8, 2009), available at 107 DTR GG-1, 2009 (Westlaw)
59. see also ORZECHOWSKI & WALKER, supra note 20, at 22 tbl.8 (providing list of gross state cigarette taxes for various fiscal years).
60. ANN BOONN, CAMPAIGN FOR TOBACCO-FREE KIDS, Top Combined State-Local Cigarette Tax Rates (June 23, 2010), http://www.tobaccofreekids.org/research/ factsheets/pdf/0267.pdf.
61. N.Y. City Dep't of Fin., Cigarette Tax Enforcement, http://www.nyc.gov/ html/dof/html/services/services-fraud-cigarettes.shtml (last visited June 11, 2010). In July 2002, New York City increased the excise tax on cigarettes from $0.08 to $1.50 per pack.
62. Ctrs. for Disease Control & Prevention, U.S. Dep't of Health & Human Servs., Decline in Smoking Prevalence-New York City, 2002-2006, 56 MORBIDITY & MORTALITY WKLY. REP. 604, 606 (2007). Between 2002 and 2006 New York saw a drop of approximately 19% in smoking prevalence (meaning the number of people who smoke).
63. Id at 607.
64. See David Hastie, Pack-ing a Wallop, N.Y. POST, Apr. 1, 2009, http://www.nypost.com/seven/04012009/news/regionalnews/pack-ing-a-wallop-162301. htm (stating that most cigarette packs in Manhattan cost nearly eleven dollars).
65. KEVIN DAVIS ET AL., CIGARETTE PURCHASING PATTERNS AMONG NEW YORK SMOKERS: IMPLICATIONS FOR HEALTH, PRICE, AND REVENUE, at v (2006), http://www.health. state.ny.us/prevention/tobacco-control/docs/cigarette-purchasing-patterns.pdf.
66. Id.
67. See, e.g., RAJEEV K. GOEL & WILLIAM D. KEIP, ANALYSIS OF THE IMPACT OF AN INCREASE IN THE ILLINOIS CIGARETTE EXCISE TAX 3 (2009), http://www.ipma-iacs.org/files/050509AnalysisoftheImpactofan IncreaseintheIllinoisCigaretteExciseTax.pdf (suggesting $1.00 increase in Illinois's tobacco tax may result in overall revenue loss as occurred in New Jersey)
68. Romm, supra note 41 (stating that twelve-cent increase in Louisiana's tobacco tax in 2002 resulted in "cigarette stockpiling, diminished tobacco sales and returned less revenue than lawmakers anticipated").
69. Morse, supra note 15, at 208-09
70. see CONG. BUDGET OFFICE, U.S. CONG., HISTORICAL EFFECTIVE TAX RATES, 1979-1997, at 10 (2001) ("[E]xcise taxes claimed five times the share of income from the lowestincome households that they claimed from the highest-income households.")
71. CONG. BUDGET OFFICE, U.S. CONG., FEDERAL TAXATION OF TOBACCO, ALCOHOLIC BEVERAGES, AND MOTOR FUELS 29 tbl.3 (1990) (showing that tobacco taxes consume 4% of poorest quintile's post-tax income, compared to 0.5% of wealthiest quintile's)
72. Jane Gravelle & Dennis Zimmerman, Cigarette Taxes to Fund Health Care Reform, 47 NAT'L TAX J. 575, 575 (1994) (stating that selective excise taxes "impose a heavier share of the burden on lower-income individuals than does the traditional source of federal revenue, the income tax").
73. Morse, supra note 15, at 208.
74. W. Kip Viscusi, Cigarette Taxation and the Social Consequences of Smoking, in TAX POLICY AND THE ECONOMY 51, 60 (James M. Poterba ed., 1995).
75. Id.
76. CTRS. FOR DISEASE CONTROL & PREVENTION, U.S. DEP'T OF HEALTH & HUMAN SERVS., Ser. 10, No. 235 SUMMARY HEALTH STATISTICS FOR U.S. ADULTS: NATIONAL HEALTH INTERVIEW SURVEY, 2006, at 135 tbl.XV (2007).
77. See supra notes 22-26 and accompanying text for a discussion of the argument by sin tax proponents that such taxes protect low-income individuals by motivating them to quit using the harmful products.
78. Radley Balko, Editorial, Hike in Cigarette Tax Opens Door to Other Vices, CHI. SUN-TIMES, Apr. 7, 2004, at 49.
79. See supra Section II.A.4 for a discussion of voter response to sin taxes.
80. William J. Hunter & Michael A. Nelson, Excise Taxation and the Theory of Tax Exploitation, 45 PUB. FIN. 268, 269 (1990).
81. Id. at 275
82. see also Baxandall, supra note 28, at 26 (citing a poll in which 71% of Connecticut residents surveyed supported large increase in cigarette taxes "even though a majority said the tax would be unfair to smokers").
83. Hunter & Nelson, supra note 57, at 278-79
84. see also Reiter, supra note 15, at 464-65 (arguing that sin taxes are unfair redistributions of wealth).
85. GERALD PRANTE & JOSEPH HENCHMAN, TAX FOUND., NO. 158: FUNDING S-CHIP WITH FEDERAL CIGARETTE TAX INCREASE IS POOR TAX POLICY (2009), http://www.taxfoundation.org/files/ff158.pdf.
86. See supra Section II.A.3 for a discussion of the position that sin taxes properly allocate negative externalities.
87. Viscusi, supra note 51, at 51.
88. JANE G. GRAVELLE, CRS REPORT FOR CONGRESS: THE PROPOSED TOBACCO SETTLEMENT: WHO PAYS FOR THE HEALTH COSTS OF SMOKING?, at CRS-3 (1998), available at http://www.law.umaryland.edu/marshall/crsreports/crsdocuments/97- 1053-E.pdf.
89. Id. at 4.
90. Jan J. Barendregt et al., The Health Care Costs of Smoking, 337 NEW ENG. J. MED. 1052, 1053-56 (1997) (finding that total cessation of smoking would result in short-term reductions of medical costs but longterm increases due to increased life expectancy).
91. See Philip Morris Issues Apology for Czech Study on Smoking, N.Y. TIMES, July 27, 2001, at C12 (stating that Philip Morris acknowledged "very real, serious and significant diseases caused by smoking" (internal quotation marks omitted)).
92. See id. (stating that Philip Morris Company officials distributed similar economic analysis in Czech Republic to show that cigarettes did not negatively affect country's budget).
93. See Strnad, supra note 27, at 1227 (stating that with respect to government interference in individual choices of food consumption, "[b]oth the food industry and independent commentators have raised this issue-one that is likely to be politically salient given the American public's strong libertarian streak" (footnote omitted)).
94. See Reiter, supra note 15, at 454 ("There is nothing about dangerous sports like hang gliding or skiing which promotes the Protestant work ethic any more than smoking, drinking or eating Big Macs ⋯ .").
95. See id. at 453-55 (discussing paternalism of sin taxes).
96. See supra notes 7-12 for a discussion of the ethical dimension of state use of tobacco settlement money.
97. Four states (Florida, Minnesota, Mississippi, and Texas) are not parties to the 1998 tobacco settlement. Instead, each of these states separately settled its claims against the tobacco companies. C. STEPHEN REDHEAD, CRS REPORT FOR CONGRESS: TOBACCO MASTER SETTLEMENT AGREEMENT (1998): OVERVIEW, IMPLEMENTATION BY STATES, AND CONGRESSIONAL ISSUES, at CRS-1 (1999), available at http://www.law.umaryland.edu/marshall/crsreports/crsdocuments/RL30058.pdf.
98. ORZECHOWSKI & WALKER, supra note 20, at iv.
99. ERIC LINDBLOM, CAMPAIGN FOR TOBACCO-FREE KIDS, ACTUAL TOBACCO SETTLEMENT PAYMENTS RECEIVED BY THE STATES 2 (2009), http://www.tobaccofreekids.org/ research/factsheets/pdf/0218.pdf.
100. According to a study undertaken by the National Conference of State Legislatures, as of fiscal year 2005, twenty-six states earmarked tobacco tax revenues, while the remaining twenty-three did not (New Jersey did not respond to the survey). ARTURO PÉREZ, NAT'L CONFERENCE OF STATE LEGS., EARMARKING STATE TAXES, FY 2005, app. B at 6 (2008). Those states that did earmark used the revenues for, among others, the following purposes: education, state highways, health/welfare, and debt service.
101. Id.
102. U.S. GOV'T ACCOUNTABILITY OFFICE, supra note 8, at 5-12.
103. The major tobacco companies at the time were Philip Morris, R.J. Reynolds Tobacco Company, Brown & Williamson Tobacco Corporation, and Lorillard Inc. REDHEAD, supra note 72, at CRS-1 n.1. R.J. Reynolds and Brown & Williamson merged in 2003, leaving only three major tobacco companies in the United States. R.J. Reynolds, History, http://www.rjrt.com/history.aspx (last visited Aug. 11, 2010). As mentioned previously, four states, Mississippi, Minnesota, Texas, and Florida, did not participate in the MSA because they had already individually settled their claims against the tobacco companies. REDHEAD, supra note 72, at CRS-1.
104. MSA § XII(a), at 110-17.
105. For example, under the MSA the companies agreed to restrict their advertising, MSA § III(d), at 22- 24, their lobbying activities, MSA § III(m), at 29-32, and to cease certain practices such as sponsoring athletic events, MSA § III(c)(1)(D), at 19, and branding merchandise, MSA § III(f), at 25-26.
106. JOY JOHNSON WILSON, SUMMARY OF THE ATTORNEYS GENERAL MASTER TOBACCO SETTLEMENT AGREEMENT (1999), http://academic.udayton.edu/health/syllabi/tobacco/ summary.htm. While this was the estimate for the amount of payments in the first twenty-five years of the agreement, the payments in fact extend into perpetuity.
107. MSA § IX(c), at 56-57.
108. MSA § IX(c), at 45-47.
109. MSA § IX(j), at 80-83.
110. In 1998, prior to the MSA, the national average price for a pack of premium brand cigarettes was $2.29. ORZECHOWSKI & WALKER, supra note 20, at 150. The following year, after the major tobacco manufacturers entered into the MSA, the average price for the same premium brand cigarettes increased to $3.05. Id. at 152. This 33% increase has been attributed to the companies' obligations under the MSA.
111. See THOMAS C. CAPEHART, JR., TRENDS IN THE CIGARETTE INDUSTRY AFTER THE MASTER SETTLEMENT AGREEMENT 4 (U.S. Dep't of Agric., Electronic Outlook Report No. TBS-250-01, 2001), http://www.ers.usda.gov/publications/tbs/oct01/tbs250-01/ tbs250-01.pdf ("Cigarette prices surged 45 cents per pack on November 16, 1998, the day the Master Settlement Agreement (MSA) was signed.")
112. see also REDHEAD, supra note 72, summary, para. 1 ("Cigarette price increases have passed on [MSA] settlement costs to smokers.").
113. MSA § I, at 2.
114. Governors also expressed their intention to use the tobacco settlement proceeds to remedy tobaccorelated ills. See HEALTH POLICY STUDIES DIV., NAT'L GOVERNORS ASS'N, 1999 STATE INITIATIVES ON SPENDING TOBACCO SETTLEMENT REVENUES 1 (2000), http://www.nga.org/Files/pdf/000125TOBACCO.pdf ("Health initiatives, including tobacco control programs, are the Governors' top priority for tobacco settlement revenues.").
115. Christine Hall, States Spend Tobacco Settlement on Budget Shortfalls, BUDGET & TAX NEWS, May 1, 2004, http://www.heartland.org/policybot/results/ 14910/States-Spend-Tobacco-Settlement-on-Budget-Shortfalls.html (internal quotation marks omitted).
116. Press Release, Iowa Dep't of Justice, Statement of Attorney Gen. Tom Miller (Nov. 23, 1998), http://www.iowa.gov/government/ag/consumer/press- releases/tob-fin.html.
117. U.S. GOV'T ACCOUNTABILITY OFFICE, supra note 8.
118. Id. at 2. Of the $52.6 billion received by the states, $36.5 billion were payments from the tobacco companies and $16.1 billion were payments certain states received by securitizing their future MSA payments.
119. This table is reproduced from U.S. GOV'T ACCOUNTABILITY OFFICE, supra note 8, at 6.
120. Unallocated is defined by the 2007 GAO Report as amounts not allocated for any specific purpose, such as amounts allocated to dedicated funds that have no specified purpose; amounts states chose not to allocate in the year Master Settlement Agreement payments were received that will be available for allocation in a subsequent fiscal year; interest earned from dedicated funds not yet allocated; and amounts that have not been allocated because the state had not made a decision on the use of the Master Settlement Agreement payments.
121. U.S. GOV'T ACCOUNTABILITY OFFICE, supra note 8, at 14.
122. General purposes include "amounts allocated for attorneys' fees and other items, such as law enforcement or community development, which could not be placed into a more precise category. This category also includes amounts allocated to a state's general fund that were not earmarked for any particular purpose."
123. Id. at 13.
124. States' allocations do not match the payment amounts on an annual basis because states carried over funds from one year to the next and earned interest on their payments.
125. Percentages do not total to 100 due to rounding.
126. The spending for "health" purposes is not limited to tobacco-related health care. This category includes amounts allocated for direct health care services, health insurance, hospitals, medical technology, public health services, and health research.
127. U.S. GOV'T ACCOUNTABILITY OFFICE, supra note 8, at 13.
128. At the time of the last significant state budgetary crisis in 2003, several states devoted almost all of their tobacco revenues to covering budget shortfalls. For example, California allocated approximately 75% of its MSA payments toward budget shortfalls
129. Wisconsin devoted almost 80%; and Idaho devoted over 90%. U.S. GOV'T ACCOUNTABILITY OFFICE, GAO-04-518, TOBACCO SETTLEMENT: STATES' ALLOCATIONS OF FISCAL YEAR 2003 AND EXPECTED FISCAL YEAR 2004 PAYMENTS 32, 36, 58 (2004), available at http://www.gao.gov/new.items/d04518.pdf.
130. MSA § 1, at 2.
131. See Robert S. Wood, Tobacco's Tipping Point: The Master Settlement Agreement as a Focusing Event, 34 POL'Y STUD. J. 419, 431 (2006) ("State governments are not spending their settlement dollars primarily on tobacco control as was anticipated, and have in fact substantially increased excise taxes to generate more revenue from cigarette sales. This has created a de facto partnership with the industry that will undermine their incentives to craft aggressive tobacco control programs as they become dependent on the revenue stream generated by tobacco sales.").
132. See MSA Exhibit E, at E-1 (explaining how Volume Adjustment is calculated).
133. MSA § IX(d)(1)-(4), at 58-76.
134. MSA § IX(d)(2)(D), at 63-68.
135. See CAMPAIGN FOR TOBACCO-FREE KIDS, supra note 13, at i (reporting that "no state is funding tobacco prevention programs at levels recommended by the U.S. Centers for Disease Control and Prevention").
136. MSA § IX(c), at 56.
137. MSA § IX(c)(1), at 57.
138. Id. In addition to this base payment, for years 2008-2017, the MSA calls for additional "strategic contribution payments" of $861,000,000 from the companies to the states. MSA § IX(c)(2), at 57-58.
139. See MSA § IX(j), at 80-83 (listing adjustments to Base Amount).
140. The MSA sets the Base Volume at 475,656,000,000 cigarettes. MSA Exhibit E § A, at E-1.
141. The Volume Adjustment formula is: (Base Amount) × (0.98) × [1 - (Actual Volume/Base Volume)] MSA Exhibit E § B(i), at E-1.
142. The Volume Adjustment would in fact reduce the payment amount by 9.8% if shipment volumes dropped 10%. This is because the Volume Adjustment formula contains a constant factor of 0.98, as shown in note 107.
143. See Molteni, supra note 12, at 5 (reporting that disagreement is known as "'2003 NPM Adjustment Dispute'").
144. MSA § II(jj), at 11. The Participating Manufacturers are further divided between Original Participating Manufacturers ("OPMs") and Subsequent Participating Manufacturers ("SPMs"). The OPMs are the largest domestic tobacco companies (Philip Morris, RJR, and Lorillard), which were the initial companies to settle with the states. MSA § II(hh), at 10. The SPMs are approximately forty smaller tobacco manufacturers that joined the MSA after the OPMs.
145. See MSA § II(tt), at 16 (describing qualifications of SPMs)
146. see also NAT'L ASS'N OF ATTORNEYS GEN., PARTICIPATING MANUFACTURERS UNDER THE MASTER SETTLEMENT AGREEMENT AS OF JULY 27, 2010 (2010), available at http://www.naag.org/backpages/naag/tobacco/msa/participating-manu/ 2010-07-27-PM-List.pdf/file-view (providing an updated list of Participating Manufacturers).
147. MSA §§ II(nn), at 13-14, XII(a), at 110-17.
148. MSA § II(cc), at 9.
149. MSA § XVIII(t), at 138.
150. Even though NPMs do not have to make MSA payments, they are subject in all forty-six MSA states to legislation requiring them to pay into a twenty-five-year escrow amounts comparable to the MSA payments imposed on Participating Manufacturers. MSA Exhibit T, at T-4 to T-5. These funds are available to the states in the event that the states elect to pursue claims against the NPMs for the damages caused by their cigarettes, including any health care costs for treating smoking-related illnesses.
151. See MSA Exhibit T, at T-4 (explaining that escrow funds can be payable for either judgment or settlement amounts).
152. See Dean Foust & Nanette Byrnes, The High Cost of Nicotine Withdrawal, BUSINESSWEEK, May 23, 2005, at 40 (noting that Big Tobacco lost eight points of that market share between 1998 and 2005). The original four OPMs held approximately 97% of the cigarette market in 1997, the base year for determining whether the PMs suffer a market share loss for purposes of the NPM Adjustment.
153. See Who Owns What? The Companies at a Glance, FRONTLINE ONLINE, http://www.pbs.org/wgbh/pages/frontline/shows/settlement/big/owns.html (last visited Aug. 12, 2010) (showing market share as of July 1997 of tobacco companies involved in Master Settlement Agreement) (excerpted from CARRICK MOLLENKAMP ET AL., THE PEOPLE VS. BIG TOBACCO: HOW THE STATES TOOK ON THE CIGARETTE GIANTS 7-9 (1998)).
154. The MSA literally states that the purpose of the NPM Adjustment is "[t]o protect the public health gains achieved by this Agreement." MSA § IX(d)(1), at 58.
155. MSA § IX(d)(1)(A)-(B)(i), at 59-60.
156. MSA § IX(d)(1)(D), at 62-63.
157. MSA § IX(d)(1)(C), at 61-62.
158. Non-Participating Manufacturers have filed several lawsuits challenging aspects of the MSA based on their position that the MSA violates federal antitrust statutes.
159. See, e.g., Tritent Int'l Corp. v. Kentucky, 467 F.3d 547, 557-58 (6th Cir. 2006) (holding that indirect anticompetitive effect of state statute enforcing MSA did not amount to direct authorization of anticompetitive behavior required for Sherman Act preemption)
160. Xcaliber Int'l Ltd., LLC v. Foti, 2006 WL 2990126, at *1-2 (E.D. La. Oct 18, 2006) (holding that antitrust claim against state statute implementing cigarette manufacturers' MSA is not barred by issue preclusion even though statutory language is identical to suits brought in other states, because state legislatures are different entities)
161. Grand River Enter. Six Nations, Ltd. v. Pryor, 2006 WL 1517603, at *8-10 (S.D.N.Y. May 31, 2006) (denying nonparticipating cigarette manufacturer's motion for preliminary injunction barring state attorneys general from enforcing state statutes requiring escrow obligations of participating manufacturers), aff'd, 481 F.3d 60 (2d Cir. 2007)
162. S&M Brands, Inc. v. Summers, 393 F. Supp. 2d 604, 629 (M.D. Tenn. 2005) (holding that Tennessee statutes implementing cigarette manufacturer MSA were not preempted by Sherman Act), aff'd, 228 F. App'x 560 (6th Cir. 2007)
163. Freedom Holdings, Inc. v. Spitzer, 447 F. Supp. 2d 230, 265 (S.D.N.Y. 2004) (granting nonparticipating cigarette manufacturers' motion to enjoin amendment to allocable share release provision of New York's escrow statute as per se violation of Sherman Act, but denying claim that MSA and ancillary state statutes established cartel in violation of Sherman Act), aff'd, 408 F.3d 112 (2d Cir. 2005).
164. THE BRATTLE GROUP, FINAL DETERMINATION PURSUANT TO NPM PROCEDURES AGREEMENT § 19 IN THE 2003 NPM ADJUSTMENT PROCEEDING PURSUANT TO MASTER SETTLEMENT AGREEMENT § IX(d)(1)(C), at 152-56 (2006), http://www.effwa.org/ pdfs/msa1.pdf.
165. ORZECHOWSKI & WALKER, supra note 20, at 6 tbl.3.
166. "Market Share Loss" is defined in the MSA as the Participating Manufacturer's actual market share loss less 2%. MSA § IX(d)(1)(B), at 60.
167. MSA § IX(d)(1)(A)(ii), at 59.
168. See MSA § IX(d)(1)(A)(iii), at 59 (providing formula).
169. The table below shows the author's calculations of the NPM Adjustment Percentage resulting from various assumed Market Share Losses: Market Share Loss NPM Adjustment Percentage 5% 15% 10% 30% 15% 45% 20% 52% 25% 55% 30% 58% 35% 61%
170. See Molteni, supra note 12, at 5 (noting that $1.5 billion at stake in "2003 NPM Adjustment Dispute" could increase to $5.3 billion based on 2004-2008 sales).
171. MSA § IX(d)(1)(C), at 61. 130. MICH. TOBACCO SETTLEMENT FIN. AUTH. OFFERING CIRCULAR 22 (2008) [hereinafter MICH. CIRCULAR] (on file with author).
172. See generally The Brattle Group: Experts, http://www.brattle.com/Experts/ ExpertDetail.asp?ExpertID=60.
173. Id. at 23-25.
174. Id. at 25.
175. MSA § IX(d)(2)(B), at 63-64.
176. Id.
177. MSA § IX(d)(2)(E), at 65-66.
178. MSA § IX(d)(2)(C), at 64.
179. MICH. CIRCULAR, supra note 130, at 25 ("As of March 5, 2008, 47 of 48 state courts ⋯ that have thus far considered the issue of whether a diligent enforcement dispute should be resolved in state courts or through arbitration have held in favor of the arbitration process.").
180. See Dan Seymour, Tobacco Firms Free $540M, BOND BUYER, Mar. 3, 2009, at 1 (reporting that Lorillard Tobacco Company and R.J. Reynolds Tobacco Company released $540 million of disputed funds to states in order to avoid further appeals by states over whether diligent enforcement issue is subject to arbitration).
181. MSA § IX(d)(2)(C), at 64.
182. See MSA Exhibit A, at A-1 (setting forth "State Allocation Percentages" of MSA payments that each state receives).
183. The MSA is silent as to whether the "excess" NPM Adjustment for the year in question (in this example the remaining $179,200,000 (= $1,200,000,000 - 1,020,800,000)) would be applied against New York's MSA payment in subsequent years until the excess is fully used or whether the excess "expires" unused. Cf. MSA § IX(d)(2)(D), at 64-65 (applying excess NPM adjustment to other states' MSA payments until balance is zero).
184. PÉREZ, supra note 75, at 2.
185. Id.
186. Id. at 6 app. B.
187. Id. at 104 app. D.
188. Id. at 18 app. D.
189. See, e.g., Derek Thompson, In Praise of Sin Taxes for Cigarettes, Soda, Marijuana ⋯, THE ATLANTIC, May 21, 2009, http://business.theatlantic.com/ 2009/05/cigarette-tax-soda-tax-marijuana-tax-levy-it-on-me.php ("At the end of the day, we might as well tax the things we're only going to have to pay for later."). Perhaps at no time was the focus on revenue rather than health more apparent than in the debate over whether to repeal Prohibition. Desperately in need of tax revenue, the Democratic Party's platform has been characterized as supporting the theme: "'If only given a chance, Americans might drink themselves into a balanced budget.'" Yelvington, supra note 14, at 40 (quoting MARK LEFF, THE LIMITS OF SYMBOLIC REFORM: THE NEW DEAL AND TAXATION, 1933-1939, at 31 (Cambridge Univ. Press, 1984)).
190. Craig L. Johnson, The State of the Tobacco Settlement: Are Settlement Funds Being Used to Finance State Government Budget Deficits? A Research Note, PUB. BUDGETING & FIN., Spring 2004, at 113, 121
191. see also Joseph C. Shenker & Anthony J. Colletta, Asset Securitization: Evolution, Current Issues and New Frontiers, 69 TEX. L. REV. 1369, 1374-75 (1991) (defining securitization as one form of financing transactions and identifying common elements).
192. Securitization of MSA payments has been likened to the decision confronted by a lottery winner over whether to take a smaller lump sum payment up front or an aggregate larger amount paid out periodically over a lengthy period of time.
193. See Joni James & David Milstead, States Mull Whether to Sell Stream of Tobacco Dollars, WALL ST. J., Aug. 2, 2000, at F1 (describing how discounting to present value would result in smaller lump sum payments for states considering securitization).
194. Matthew Hanson, Virginia Deal the Latest Sign of Tobacco's Return, BOND BUYER, Apr. 25, 2007, at 6. Under a New York consent decree, New York City and each of the state's fifty-seven counties receive a portion of the state's MSA payments directly. U.S. GOV'T ACCOUNTABILITY OFFICE, GAO-01-851, TOBACCO SETTLEMENT: STATES' USE OF MASTER SETTLEMENT AGREEMENT PAYMENTS 13-14 (2001), available at http://www.gao.gov/new.items/d01851.pdf. Under a memorandum of understanding among the state of California, its fifty-eight counties, and four major cities, the state sends a portion of its MSA payments to the counties and cities.
195. Id. at 13.
196. These states are: Alabama, Alaska, Arkansas, California, Iowa, Louisiana, Michigan, Missouri, New Jersey, New York, North Dakota, Ohio, Oregon, Rhode Island, South Carolina, South Dakota, Virginia, Washington, West Virginia, and Wisconsin.
197. See U.S. GOV'T ACCOUNTABILITY OFFICE, GAO-06-502, TOBACCO SETTLEMENT: STATES' ALLOCATIONS OF FISCAL YEAR 2005 AND EXPECTED FISCAL YEAR 2006 PAYMENTS 12-19 (2006), available at http://www.gao.gov/new.items/d06502.pdf (showing that many states have allocated payments for debt on securitized proceeds in fiscal years 2005 and 2006).
198. Id. at 7-8.
199. Caitlin Devitt & Matt Hanson, Ohio MSA Sale Still on Track, BOND BUYER, Oct. 5, 2007, at 1.
200. U.S. GOV'T ACCOUNTABILITY OFFICE, supra note 151, at 10-11 fig.1.
201. See AM. LUNG ASS'N, SECURITIZATION-BREAKING THE PROMISE 1 (on file with Temple Law Review) ("[S]ecuritization will only give the states 30 to 40 cents on the dollar.")
202. CAMPAIGN FOR TOBACCOFREE KIDS, SECURITIZING STATE TOBACCO SETTLEMENT PAYMENTS: MYTHS VS. FACTS 2 (2002), http://www.tobaccofreekids.org/research/ factsheets/pdf/0132.pdf ("States will receive only pennies for every future dollar of settlement revenues they securitize ⋯.").
203. AM. LUNG ASS'N, supra note 155, at 3-5.
204. The average transaction cost for an issuance is 2.82% of par value of the bonds sold. Johnson, supra note 148, at 123.
205. See Johnson, supra note 148, at 125 (arguing states are shortsighted to forgo long-term money stream to cover short-term state deficit).
206. Walter Henry Clay McKay, Commentary, Reaping the Tobacco Settlement Windfall: The Viability of Future Settlement Payment Securitization as an Option for State Legislatures, 52 ALA. L. REV. 705, 706-13 (2001).
207. See Gary Ellis, Analysis of Tobacco Revenue Settlement Bonds: Assessing Cigarette Consumption Decline Estimates, J. STRUCTURED FIN., Winter 2008, at 60, 62 (showing annualized decline rate in cigarette consumption of 2.68% from 1996-2006 and exceeding 3% from 2003 forward).
208. See infra Section V for a discussion of Price v. Philip Morris Inc., No. 00-L-112, 2003 WL 22597608 (Ill. Cir. Ct. Mar. 21, 2003), rev'd, 848 N.E.2d 1 (Ill. 2005) and concerns in 2003 over a possible bankruptcy for Philip Morris, the nation's largest cigarette manufacturer.
209. McKay, supra note 159, at 715.
210. Ellis, supra note 160, at 61. For example, when California issued its tobacco bonds it established a special purpose corporation called Golden State Tobacco Securitization Corporation. The state then sold its right to future MSA payments to the special purpose corporation, which issued the bonds. GOLDEN STATE TOBACCO SECURITIZATION CORP., ENHANCED TOBACCO SETTLEMENT ASSET-BACKED BONDS, SERIES 2003B, at 19 (2003) [hereinafter CAL. CIRCULAR] (on file with Temple Law Review).
211. TOBACCO SETTLEMENT FIN. CORP., ASSET-BACKED REVENUE BONDS, SERIES 2003A, at S-3, S-7 (2003) [hereinafter N.Y. CIRCULAR] (on file with Temple Law Review).
212. MICH. CIRCULAR, supra note 130, at S-4 to S-5 (emphasis added).
213. In at least two instances, market conditions at the time of bond issuances required states to include in their offerings an assurance to bondholders that if MSA payments by the tobacco companies were insufficient to satisfy the bond obligations, the governor would request that the states' legislative bodies allocate money necessary to pay the bonds. E.g., CAL. CIRCULAR, supra note 163, at 3
214. N.Y. CIRCULAR, supra note 164, at S-2
215. see also Richard Briffault, Foreword: The Disfavored Constitution: State Fiscal Limits and State Constitutional Law, 34 RUTGERS L.J. 907, 920-25 (2003) (discussing states' use of "subject-toappropriation" debt to avoid constitutional limitations on debt issuance).
216. While the legal documents relating to the tobacco bond issuances usually place the risk of default on the bondholders, at least one author suggests that states may elect to make bond payments in the event of default in order to avoid a lower credit rating and higher borrowing costs in the future.
217. See Teresa Dondlinger Trissell, Note, Derivative Use in Tax-Exempt Financing, 48 TAX LAW. 1021, 1028 (1995) (describing how Texas's promises to make bond payments created expectations that Texas would pay municipal bond when it had no obligation to do so to maintain double-A rating).
218. There may be procedural requirements to securitizing sin tax revenues in some states. More than three quarters of the states have debt limitations in their constitutions.
219. There may be procedural requirements to securitizing sin tax revenues in some states. More than three quarters of the states have debt limitations in their constitutions. Stewart E. Sterk & Elizabeth S. Goldman, Controlling Legislative Shortsightedness: The Effectiveness of Constitutional Debt Limitations, 1991 WIS. L. REV. 1301, 1315-16. These limitations require state debt to be approved by a supermajority of the legislature, by voter referendum, or by both.
220. See Briffault, supra note 166, at 915-16 (describing variety of ways in which state constitutions impose limits on ability of state and local governments to borrow). Bonds secured by a single tax revenue stream, such as a sin tax, may need to meet such procedural requirements, though some cases indicate otherwise.
221. See, e.g., In re Okla. Capitol Improvement Auth., 958 P.2d 759, 771-72 (Okla. 1998) (finding that bonds to finance highway construction were exempt from debt limitations if they were backed by taxes on motor fuels and vehicle license fees)
222. Convention Ctr. Auth. v. Anzai, 890 P.2d 1197, 1206-07 (Haw. 1995) (issuing bond to finance convention center might not be "debt" within meaning of constitutional constraint if it was backed by new tax on hotel occupancy).
223. See supra Section II.A.1 for a discussion of the demand inelasticity of cigarettes.
224. See supra Section III.B for a discussion of adjustments and the resulting effects on states' behavior.
225. See Robert S. Amdursky, The 1988 Municipal Bankruptcy Amendments: History, Purposes, and Effects, 22 URB. LAW. 1, 2 n.4 (1990) (explaining that "general obligation" bond is backed by full faith and credit of issuing government entity, whereas "revenue" bond (also known as "special" or "limited" obligation bond) is backed solely by specified revenue stream)
226. Kevin A. Kordana, Tax Increases in Municipal Bankruptcies, 83 VA. L. REV. 1035, 1046-55 (1997) (explaining various forms of municipal financing).
227. See Chem. Bank v. Wash. Pub. Power Supply Sys., 666 P.2d 329, 346 (Wash. 1983) (en banc) (Dore, J., concurring) ("The bonds in question are 'revenue' bonds, not general obligation bonds, and payable solely out of any revenues to be generated by the projects⋯There is no obligation to pay revenue bonds where there are no revenues."). Several states limit their liability on revenue bonds as a matter of statute.
228. See, e.g., WASH. REV. CODE ANN. § 28B.07.320(9) (West 2009) (disavowing any obligation on state to levy taxes to pay bond).
229. Opinion, Addicted to Tobacco, WALL ST. J., Apr. 4, 2003, at A8.
230. Id.
231. Letter from Denise F. Keane, Senior Vice President & Gen. Counsel, Philip Morris U.S.A., to Christine O. Gregoire, Att'y Gen. of Wash. (Mar. 27, 2003), reprinted in Brief of Amici Curiae, Gregg Renkes, Att'y Gen. of Alaska et al., Price v. Philip Morris Inc., No. 00-L-112 (Ill. Cir. Ct. Apr. 7, 2003), http://www.atg.wa.gov/uploadedFiles/Home/News/Press-Releases/2003/ Amicus-brief040803.pdf (brief in support of reduction of appeal bond ordered in No. 00-L-112, 2003 WL 22597608 (Ill. Cir. Ct. Mar. 21, 2003), rev'd, 848 N.E.2d 1 (Ill. 2005)).
232. The attorneys general were joined on the amicus brief by the National Conference of State Legislatures, a bipartisan organization led by state legislators from across the country. Brief of Amici Curiae, supra note 175, at 1-2.
233. Id. at 2-3
234. Id. at 11.
235. Elizabeth Albanese, Philip Morris' Bond Lowered, BOND BUYER, Apr. 15, 2003, at 1.
236. See, e.g., ALA. CODE § 6-12-4 (LexisNexis Supp. 2009) (capping bond at $125 million); CAL. HEALTH & SAFETY CODE § 104558 (West 2006) ($150 million cap)
237. HAW. REV. STAT. ANN. § 328L-7 (LexisNexis 2008) ($150 million cap)
238. KAN. ST. ANN. § 50-6a05 (2005) ($25 million cap).
239. Tellingly, seven of the states that did not join the amicus brief (Alabama, California, Connecticut, Illinois, Missouri, Wisconsin, and New York) had securitized some or all of their MSA payments at the time of the Illinois court's ruling.
240. See supra note 151 for a listing of states that securitized their MSA payments.