The Appropriations Committee and the Health and Human Services Committee of the Legislature spent Tuesday morning hearing testimony about the Health Care Cash Fund.

Senators are evaluating the sustainability of fund and programs that are funded with money from the fund. The fund receives funds from the Nebraska Tobacco Settlement Trust Fund and the Nebraska Intergovernmental Transfer Trust Fund.

The purpose of today's hearing was to address:

1. The outcome and priority of funding in fulfilling the purpose of the Nebraska Health Care Funding Act stated in section 71-7606, which is to provide for the use of dedicated revenue for health-care-related expenditures, including compliance with the requirement that any funds appropriated or distributed under the act shall not be considered ongoing entitlements or obligations on the part of the State of Nebraska and shall not be used to replace existing funding for existing programs;
2. Statutory language identifying the tobacco settlement fund and intergovernmental transfer fund as trust funds notwithstanding that neither is a trust fund. Trust funds are assets held in trust, the use of which is governed by the conditions of the trust. Neither the tobacco settlement fund nor the intergovernmental transfer fund is governed by the conditions of a trust, and the use of both funds is strictly the prerogative of the Legislature; and
3. Whether sustainability should be the policy governing allocations from the Nebraska Health Care Cash Fund. The latest report by the Nebraska Investment Council filed on September 22, 2010, indicates, based on current appropriations, that outflows will exceed inflows in every year in the next decade. Some projections estimate the fund will be depleted by 2037 or 2038. Hewitt, Ennis, Knupp, a consultant contracted by the Nebraska Investment Council, reported in March 2011 that if the current level of annual commitments is not reduced, "spending levels of high and very high will likely result in declining portfolio, under the current aggressive asset allocation. If spending can be kept low, portfolio will likely grow."
   

LB 692 passed in the 2001 Legislative Session provided the current policy framework for the use of the Nebraska Health Care Cash Fund and established the tobacco settlement and intergovernmental transfer funds as the two sources of revenue for the ·fund. The intent of LB 692 was to use the funds for health-related purposes.

Section 71-7606 states the purpose of the Nebraska Health Care Cash Fund:

1. The purpose of the Nebraska Health Care Funding Act is to provide for the use of dedicated revenue for health-care-related expenditures.
   
2. 
   
3. Any funds appropriated or distributed under the act shall not be considered ongoing entitlements or obligations on the part of the State of Nebraska and shall not be used to replace existing funding for existing programs.
   
4. 
   
5. No funds appropriated or distributed under the act shall be used for abortion, abortion counseling, referral for abortion, or research or activity of any kind involving the use of human fetal tissue obtained in connection with the performance of an induced abortion or involving the use of human embryonic stem cells or for the purpose of obtaining other funding for such use.
   
6. 
   
7. The Department of Health and Human Services shall report annually to the Legislature and the Governor regarding the use of funds appropriated under the act and the outcomes achieved from such use. 
   

The fund supports a number of programs, including medicaid smoking cessation and tobacco prevention and control.

A bill passed by the Nebraska legislature this year that addresses how Nebraska meets provision of the 1998 tobacco Master Settlement Agreement with four big tobacco companies is the bill a Grand Island senator considers as his most important bill of the 2011 legislative session, according to a post about LB590 he made Wednesday.

"It gave me great satisfaction to introduce and shepherd LB 590 through the legislative process because passage of LB 590 will protect Nebraska taxpayers from a loss of tobacco settlement funds," said Sen. Mike Gloor. "LB 590 is a very complicated bill made necessary by the constant challenging of the Master Tobacco Settlement Agreement by the large tobacco companies that are part of the settlement."

LB 590 will help retain the current funding of the Health Care Cash Fund and protect future payments to the tune of around $59 million a year. 

The money is used for health related programs including cancer research and the program to prevent tobacco use and help Nebraskans quit smoking.

Of the bills the senator worked on this session, this bill also had the largest financial impact, he said.

LB590 changes law regulating tobacco licenses, tobacco sales, cigarette taxes, the state directory of cigarettes, escrow deposits under the tobacco Master Settlement Agreement (MSA) and reporting requirements. The bill was passed by the legislature Monday, May 23, and was approved by Gov. Dave Heineman Thursday, May 26

Negotiators for Altria Group Inc.'s Philip Morris USA and other tobacco companies have reached a tentative deal with officials representing the 46 states that signed the 1998 tobacco Master Settlement Agreement, the Wall Street Journal has reported. 

Tobacco companies have contended that they have lost business because states haven't adequately sought payments from smaller competitors -- such as tribal tobacco companies -- which weren't part of the 1998 agreement between 46 states and four tobacco companies. This deal could mean big tobacco companies could recoup $2 billion in money they have withheld or disputed under the 1998 agreement.

Lance Morgan, chief executive of Ho-Chunk Inc., the economic-development arm of the Winnebago tribe in Nebraska, which distributes cigarettes on tribal lands, told the Wall Street Journal that what the states and companies "are doing is wrong by any sort of definition of fair play." States, under the deal, would be attacking tribal economies to protect big companies' market shares, he told the WSJ.

According to a tobacco settlement draft memorandum of understanding referenced by Indianz.com and posted in yesterday's Nebraska tobacco prevention news, states will be required to enact legislation to collect their sales tax in Indian Country. All sales to non-Indians will be subject to state taxation.

Native American brands, which include Seneca, King Mountain and Mohawk, may account for as much as 4 percent of U.S. cigarette volumes, Morgan Stanley analyst David Adelman told the Wall Street Journal. States such as Nebraska have enacted laws requiring the nonparticipating companies to set aside payments in escrow accounts. Last year, the U.S. market share of nonparticipating companies rose to 6.5 percent, the highest mark since 2004, when it stood at 8.27 percent, according to the National Association of Attorneys General.

In Nebraska, LB590, introduced this year by Grand Island Sen. Mike Gloor, changes law regulating tobacco licenses, tobacco sales, cigarette taxes, the state directory of cigarettes, escrow deposits under the tobacco Master Settlement Agreement (MSA) and reporting requirements. The bill was passed by the legislature Monday, May 23, and was approved by Gov. Dave Heineman Thursday, May 26.

Philip Morris USA and other big tobacco companies are trying to reopen the 1998 Master Settlement Agreement and force states to go after tribal retailers, according to Indianz.com.

According to a tobacco settlement draft memorandum of understanding referenced by Indianz.com, states will be required to enact legislation to collect their sales tax in Indian Country. All sales to non-Indians will be subject to state taxation.

Sales to tribal members will remain tax exempt. Indianz.com reports that the draft memorandum restricts tax-free sales to "adult enrolled" tribal members who are "domiciled" on "Qualified Tribal Lands."

This language indicates that tribal members must live on a reservation in order to qualify for tax-free cigarettes.

The draft memorandum also requires states to consult "in good faith" with big tobacco before developing their legislation. 

In Nebraska, LB590, introduced by Grand Island Sen. Mike Gloor, changes law regulating tobacco licenses, tobacco sales, cigarette taxes, the state directory of cigarettes, escrow deposits under the tobacco Master Settlement Agreement (MSA) and reporting requirements. The bill was passed by the legislature Monday, May 23, and was approved by Gov. Dave Heineman Thursday, May 26