Judge Rules Against Minnesotas Cigarette 'Fee'

Minnesota's 75-cent-per-pack charge on cigarettes was struck down by a Ramsey County judge, potentially punching a big hole in the state budget. As part of a budget approved this summer, lawmakers were counting on more than $400 million over two years from the so-called health impact fee.Lawyers for cigarette makers argued that the fee violated a 1998 tobacco settlement that funneled billions of dollars to the state to cover health costs caused by smoking. That settlement also banned future claims on tobacco companies. Gov. Tim Pawlenty insisted on calling the charge a "fee" so he could continue to claim he hadn't broken a pledge to raise taxes. In striking down the fee, Ramsey County District Judge Michael Fetsch ordered the state to pay refunds to the suing tobacco companies for fees paid since the law took effect in August. Fetsch said the way the fee was crafted violated the 1998 settlement. He also said the fee would be selectively enforced if it only applied to cigarettes not part of the earlier settlement. "The purpose of the legislation was to recover health-related costs and to prevent tobacco use by youths," the judge wrote.Ramsey County District Judge Michael Fetsch"They will cease smoking the more expensive cigarettes and buy the less expensive cigarettes from the settling defendants' distributors." Pawlenty's office did not immediately return a call seeking comment. An attorney and spokesman for the tobacco companies were also unavailable. In court filings in October, Pawlenty's general counsel, Karen Janisch, contended that the law was worded to allow the state to take in the money in other ways, including directly from smokers. "The commissioner of revenue has ample authority under the (health impact fee) act to collect ... the HIF from persons and entities other than defendants' distributors, if necessary," she wrote. Major tobacco companies sued soon after the law took hold, saying the fee violates a 1998 court settlement with the state in which they agreed to pay billions of dollars to end a lawsuit over health costs related to smoking. The companies, including the makers of Marlboro and Camel brand cigarettes, say the state promised not to pursue future health-cost claims in return for the money. To date, the companies have paid $2.25 billion, and another $1 billion is due to come in over the next six years. Attorney General Mike Hatch, who is defending the cigarette charge, maintained that the 1998 settlement only prohibited future court claims, not legislative action.