Colorado will receive in excess of $76 million this coming fiscal year from the Tobacco Master Settlement, which is slightly less than the $82.4 million received in 2020, according to a Legislative Council Staff forecast.
A memorandum dated Feb. 10 outlined the revenues the state will likely receive from the 1998 agreement between tobacco manufacturers and governments of 52 states and territories. In return for releasing the cigarette makers from legal claims, the companies provide payments in perpetuity.
Although Colorado's settlement income has remained relatively flat over time, a decline in cigarette consumption and low inflation has contributed to a decrease.
"Additionally, the largest manufacturers that participate in the MSA, Philip Morris and R.J. Reynolds, are changing their business strategies. Specifically, the manufacturers are moving toward higher-priced premium products and non-cigarette tobacco products, and away from high-volume products," the memo noted. "This trend is expected to put downward pressure on MSA [Master Settlement Agreement] payments as the quantity of cigarettes sold declines."
Colorado will receive slightly less revenue in 2021 and 2022 due to joining another settlement in 2018, which provided a lump sum that year to be credited back to manufacturers until 2023.
In the next fiscal year, the largest portion of settlement money, $20.4 million, will go to the state's visiting in-home nurse program. The state's affordable children's health insurance program will gain an estimated $13.8 million and the University of Colorado's Anschutz Medical Campus will receive $13.4 million, partially for tobacco-related cancer research.
The memo explained that in the wake of the 2009 recession, the General Assembly began using tobacco settlement payments, which the state receives in April, to fill holes in the current fiscal year as well as pay for the next fiscal year's programs. The state has needed to loan money from the General Fund, which it deems an "accelerated payment," until the subsequent payment arrives.
For fiscal year 2020-21, the April 2020 payment covered only $17.5 million of this year's program spending. The remaining $60 million will come from the April 2021 payment.