Ohio smokers lose big as 2-year legal battle comes to an end

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Dec 23 2010

The Ohio Supreme Court has ruled that the state had the authority to shut down the Ohio Tobacco Prevention Foundation (OTPF) in 2008 and divert Ohio's share of tobacco settlement funds to other budget items. For the state that ranks dead last in the amount of money it devotes to tackling smoking, the number one preventable cause of death, those who need help in quitting now have few places to turn.

"Today's decision is devastating for Ohio," said Legacy president and CEO, Cheryl G. Healton, DrPH. "Just last week, we learned that the once-historic decline in youth smoking has stagnated and youth smoking rates have begun to increase." This was reported by the nation's barometer for youth smoking prevalence, the Monitoring the Future survey. Sadly, Ohioans will pay an extremely high price for the dismantling of the state's successful tobacco control foundation-– many with their lives," she said. Public education and quit smoking resources are proven, effective ways to save lives and, by diverting these funds for other purposes, Ohio has chosen to ignore this critical public health need. "This decision will result in significantly more spending on the back-end with increased health care costs and lost productivity from sick smokers," Healton added. "We call on Governor-elect Kasich to make a fiscally-prudent investment in the health of Ohioans by restoring the state's tobacco control programs to their previous funding levels."

Research shows that tobacco takes an enormous toll on Ohio - both in lives lost and dollars spent. Ohio's adult smoking rate is 20.3 percent, just below the national average of 20.6 percent, thanks in large measure to the work of OTPF. A report from the Campaign for Tobacco-Free Kids and other leading public health groups in November 2010, "A Broken Promise to Our Children: The 1998 State Tobacco Settlement 12 Years Later" found that Ohio is ranked last among U.S. states in the amount it spends on tobacco control efforts. The report found Ohio is spending not one penny of the recommended minimum by the Centers for Disease Control and Prevention as it has set aside no new state funds for tobacco control this fiscal year. The only state spending that Ohio has budgeted for tobacco control and prevention in FY2011 is $3.5 million in carryover from last year.

The ruling upholds the December 2009 decision of the Ohio Court of Appeals of Franklin County, Tenth Appellate District that reversed a lower court's order permanently enjoining the State from dissolving the Tobacco Use Prevention and Control Endowment Fund. The December 2009 Court of Appeals' decision represented a major step backward in the effort spearheaded by Legacy and others to safeguard the state's tobacco prevention money for its intended purpose: to save Ohioans' lives.

Today's decision means that it is up to the new governor whether the tobacco prevention and cessation programs, which were largely shut down in the wake of the state's diversion of the funds, will be re-instated. Two Ohioans were also plaintiffs in the case: Robert Miller and David Weinmann. Both longtime smokers who relied on services and programs supported by the Ohio Tobacco Use Prevention and Control Endowment Fund to quit smoking, brought claims as Ohio smokers, the intended beneficiaries of OTPF.

Legacy, created as a result of the Master Settlement Agreement (MSA), stepped forward in April 2008 after being asked by the Ohio Tobacco Prevention Foundation to help safeguard the tobacco settlement dollars Ohio had set aside for tobacco control. After the OTPF signed a contract with Legacy to preserve tobacco prevention and cessation efforts in the state, the legislature voted to abolish both OTPF and its endowment.

The 1998 MSA provided more than $200 billion to be paid to the states over 26 years in recognition of the lives and money lost to tobacco. To ensure that a substantial portion of its recovery was spent specifically on tobacco control, Ohio established OTPF and created an endowment for it. Most states have spent only a small fraction, if any, of their MSA funds to mitigate the tragic impact of the tobacco epidemic which claims the lives of more than 400,000 Americans each year.

In a state already feeling the brunt of the national recession, smoking costs Ohio more than $4 billion in annual health care costs and another $4.7 billion annually in smoking-related productivity loss (in 2004 dollars). A 2007 report by Legacy found that Ohio's Medicaid system could save $550 million within five years if all Medicaid beneficiaries who smoke, quit. Ohio would reap the third-largest savings of all the states, making the case that despite this economic downturn in Ohio, keeping these funds focused on tobacco control would be a wiser long-term investment, ultimately saving Ohioans' lives and money.

The timeline of activity related to the Ohio tobacco funding dispute is as follows:

April 2, 2008: Governor Strickland announced plans to fund an economic stimulus package in part by diverting the OTPF's endowment.
April 4, 2008: OTPF's Board responded by authorizing contracts for $190 million with up to three named organizations in order to assure that the work of tobacco control in Ohio would continue to benefit Ohioans.
April 8, 2008: OTPF entered into a contract for this amount ($190 million) with the American Legacy Foundation and provided the state treasurer with instructions to transfer the funds. Later that day, the governor signed into law legislation purporting to liquidate OTPF's endowment. The treasurer did not make the requested payment.
April 9, 2008: OTPF filed a lawsuit asserting that the legislation liquidating its endowment violated Ohio constitutional and other legal requirements.
April 10, 2008: Judge Fais of the Court of Common Pleas ordered the maintenance of the status quo and froze the endowment funds until a preliminary injunction hearing, originally scheduled for April 24, could be held.
April 15, 2008: OTPF's Board purported to withdraw its request that the state treasurer transfer the funds to the American Legacy Foundation.
April 21, 2008: The American Legacy Foundation's filed papers to intervene in the case, asking the court to declare that its contract was valid and that the state funds, wisely dedicated by the State to tobacco prevention and control, could not now be diverted for other purposes. Legacy's motion was granted and the April 24 hearing was postponed until May 8.
May 6, 2008: Governor Strickland signed into law a second bill, again diverting the OTPF's endowment and, this time, abolishing OTPF.
May 8, 2008: Judge Fais met with lawyers from the state and The American Legacy Foundation about the fate of the state's remaining tobacco settlement dollars. He scheduled the next hearing for early June and ordered that the freeze on the funds remain in effect.
May 27, 2008: Two Ohio smokers, David Weinmann and Robert Miller, who had taken advantage of OTPF funded programs to quit smoking, filed a second lawsuit, claiming that the state's decision to dissolve the endowment violated their rights as trust beneficiaries. Their case was consolidated with Legacy's case.
June 2-4, 2008: Judge Fais heard testimony and legal arguments on Legacy's motion for a preliminary injunction. He asked the parties to submit proposed findings of fact and conclusions of law by June 27, later extended to July 3.
Week of June 2, 2008: Ohio Department of Health sent notices to OTPF grant recipients informing them that their grants would be cancelled as of July 1, 2008, claiming that the department was taking this action because of the litigation and the freeze. Legacy notified ODH that Legacy had joined with OTPF in late April to successfully ask the court for permission to spend $5 million to satisfy outstanding obligations, and would like to join now with ODH to seek permission to spend additional funds on tobacco control in Ohio.
June 23, 2008: The American Legacy Foundation and the Ohio Department of Health (ODH) as well as the other state defendants filed a joint motion asking that $10 million be freed up to maintain basic tobacco control programs in Ohio.
June 24, 2008: Judge Fais signed an order designating $4 million to pay OTPF's obligations through June 30 and $6 million to fund tobacco control programs starting on July 1. This was a major decrease from the $40 million OTPF had spent in FY 2008 but it will keep some tobacco control programs alive in Ohio.
February 10, 2009: Judge Fais granted Legacy's and the individual plaintiffs' motion for a preliminary injunction, holding that the State lacked the authority to dissolve the irrevocable trust it created to ensure the state's tobacco settlement funds are used for the important mission of tobacco control and prevention in the State of Ohio. The court rejected Legacy's request to enforce the contract it had entered into with the OTPF.
June 2, 2009: Judge Fais heard testimony and legal arguments on Legacy's and the individual plaintiffs' motion for a permanent injunction.
August 11, 2009: Judge Fais granted the individual plaintiffs' motion for a permanent injunction on the basis that the State lacked the authority to dissolve the trust. The court continued its denial of Legacy's contract-based claim.
October 14, 2009: The case was argued before the Ohio Court of Appeals of Franklin County Ohio, Tenth Appellate District.
December 31, 2009: The Ohio Court of Appeals of Franklin County, Tenth Appellate District, reverses a lower court's order permanently enjoining the State from dissolving the endowment of the Ohio Tobacco Prevention Foundation (OTPF).
January 21, 2010: Legacy asked the Ohio Supreme Court to hear the appeal in its case seeking to preserve tobacco funds and the life-saving tobacco control programs they support in Ohio. Legacy's request was supported by friend of the court briefs filed by former Attorney General Betty Montgomery, former Ohio Senate President Richard H. Finan, former Director of the Ohio Department of Health, J. Nick Baird MD, and a broad array of state and national public health leaders.
March 11, 2010: The Ohio Supreme Court made the decision to hear the appeal in Legacy's case seeking to preserve tobacco funds and the life-saving tobacco control programs they support in Ohio.