Florida Deal Shelters Tobacco Payments
TALLAHASSEE (Reuters) - Florida lawmakers passed a bill on Friday to shelter the state's $450 million in annual tobacco-industry payments threatened by a Miami class-action suit that could punish the cigarette companies with potentially crippling punitive
After last-minute bargaining on the last day of the legislature's session, the House and Senate passed a bill that now goes to Gov. Jeb Bush for approval.
A spokeswoman for the governor said he would sign it.
``The governor is supportive of the compromise struck between the House and the Senate on tobacco securitization,'' said Liz Hirst, a spokeswoman for Bush. ``He considers it a great victory.''
There was no word yet on when the governor would receive and sign the bill, which was approved 115 to 0 in the Florida House and 38 to 0 in the Senate.
The bill caps at $100 million the bond necessary for tobacco companies to appeal an upcoming punitive damages award in the Engle class-action tobacco case pending in Miami.
Florida and other states fear that punitive damages in the Engle class action -- on behalf of 500,000 smokers -- may reach hundreds of billions of dollars. A verdict is expected this summer and under current Florida law, companies must post an appellate bond equal to 120 percent of a punitive damage award.
Lawmakers and investors had feared that such a huge bond could bankrupt cigarette makers and scuttle payments promised state governments under earlier legal settlements.
The Florida agreement also allows the state government to explore cashing out as much as $3 billion of future tobacco revenues by issuing bonds, legislators said. But any bond issue would have to be approved by Florida's legislature. This effectively put on hold any decision to sell part of the state's tobacco revenue, and so unblocked a major sticking point in the bargaining to get an agreement by both chambers.
The Florida House and Gov. Jeb Bush have favored selling up to half of the state's tobacco proceeds, saying that the uncertainty in the tobacco industry should prompt the state to diversify its investment. The Senate rejected the plans as too expensive, saying such a move could cost the state between $600 and $900 million.
Working against a Friday deadline to end Florida's 2000 legislative session, negotiators from both houses had appeared as late as Thursday night to be far apart in reconciling the measures to protect Florida's tobacco-industry payments.
Jurors in the Engle case, the first class-action on behalf of sick smokers to come to a verdict, last month awarded the highest compensatory damages ever to three plaintiffs.
A landmark 1997 Florida deal, as well as others in the late 1990s, compensated state governments with promises of nearly $250 billion over 25 years for the medical treatments of millions of sick smokers.