Arkansas Tobacco Settlement Commission (ATSC)

Arkansas Tobacco Settlement Commission (ATSC) Meeting Minutes January 23, 2014

Commissioners Attending: Susan Hanrahan, Chair; Karen Wheeler, Vice Chair; Roddy Lochala; Tim Atkinson; Allison Hogue (by phone)

Staff Attending: Faye Shepherd, Director; Larissa Liddell, Assistant

Guests: Bradford Phelps, Attorney General’s Office; Eric Estes, Attorney General’s Office; Onjewel Smith, ANR; Nancy Dockter, COPH; Louise Scott, MHI; Suzanne McCarthy, ACHI; Bobby McGhee, ABI; Debbie Rushing, TPCP; Matt Mitchell, TPCP; Michelle Snortland, Director of TPCP; Amanda Gibson, Attorney General Representative; Michelle Justus, ACHI; Jim Raczynski, COPH; Ann Purvis, ADH; Gary Wheeler, ADH; Autumn Sanson, Treasury Office Representative

Minutes Recorder: Larissa Liddell

Agenda Item Discussion Action/Next Steps

Call to Order/Quorum Chair Hanrahan established that a quorum existed and called the meeting to order at 10:00am.

Introduction of Attendees Chair Hanrahan introduced the new ATSC Administrative Specialist III, Larissa Liddell. Other attendees introduced themselves and gave their organizational affiliation.

Review and Approval of A motion was made for approval as presented by Commissioner Minutes were unanimously approved as Minutes from 6.11.13 and Wheeler and seconded by Commissioner Lochala. presented. 11.12.13 Meetings

Attorney, Brad Phelps provided a briefing on the Tobacco Arbitration Overview on the Tobacco (this is the 1998 settlement agreement about how tobacco products Primary Enforcement Obligation going forward Arbitration from the were sold in the states). After months and months of ligation. General to ensure those funds are deposited to ensure Attorney General Office McDaniel suggested Brad Phelps and Eric Estes craft a settlement those companies is reporting accuracy and by Bradford Phelps and strategy to get other states on board with the Arbitration. Roughly half payments are up to date.

ATSC Commission Minutes – 1.23.14 Page 1 Eric Estes of the states jointed. The other states rolled the dice on Arbitration. Another Enforcement Obligation lies with Tobacco Six of those states lost in the range of $10 million to Pennsylvania, Control, DFA, and AG Office against contraband cigarettes. Ensuring the sale of cigarettes in Arkansas that who is looking at a 9 figure lost. Claims with other states were does not have a state excise tax stamp on it does not resolved. Last year the Commission roughly received $22 million. happen. It is vital that sales of cigarettes without a state Credits on settlements will be paid back to companies in the next four excise tax stamp do not occur. years. Brad said this was a good result and has removed sufficiency legal risk of these funds going forward. These companies cannot arbitrate against the state of Arkansas until the companies have completed arbitrations up to the year, which we have settled. Two other important features of this settlement are: -companies are withholding a lot of money each year , the AG’s has cut that amount in half and are able to withhold going forward. -Arkansas is more clearly defined in what the enforcement obligations are and Brad stated that he is meeting with Eric Estes more frequently. He also stated that the settlement was not perfect, but happy to have the liability removed.

Chair Hanrahan asked if he would talk about the enforcement obligation.

Brad Phelps explained that the enforcement obligations lie with the Attorney General’s Office, DFA, and Tobacco Control. The primary enforcement obligation going forward is to ensure those funds are deposited, to ensure those companies are reporting accurately and payments are up to date. And e second enforcement obligation is the enforcement against contraband cigarettes. It is vital that sales of cigarettes without a state excise tax stamp do not occur.

Chair Hanrahan asked if we could put a stamp on e-cigarettes.

Brad Phelps states that since e-cigarettes are so new the enforcement side is not much of an issue.

Dr. McGhee complimented Brad Phelps and Eric Estes on a great job they have done with the Arbitration.

ATSC Commission Minutes – 1.23.14 Page 1 Brad Phelps recognized Eric Estes for all his work he has put in working on this Arbitration. Presentation on Tobacco Debbie Rushing introduced guest speaker, Onjewel Smith with Control from a National Americans Nonsmokers Rights Foundation. She is the southern states Work on eliminating cigarettes in restaurants, Perspective by Onjewel representative. She works in collaboration with Tobacco Free Kids, increasing tobacco tax, and putting a clamp on Smith Tobacco Control Effects, American Heart Association, American e-cigarettes. Lung Association, and American Cancer Society. ANR provides technical assistance whenever needed. Ms. Smith gave a brief description as to why Arkansas is a shining star in the south on Tobacco Control efforts: First southern state to pass a statewide smoke-free law First state to have a smoke-free car law First state to have a smoke free medical grounds policy Third state to have a statewide smoke-free psychiatric facility grounds First state to have a law restricting “ e-cigarette and e-narcotic products for kids” Arkansas has a$1.15 tobacco tax, which is one of the highest in the South, 7th of 50 states. Arkansas maintains spending at 48% of the CDC’s recommended spending level. Three concerns to keep an eye on are: Eliminating cigarettes in restaurants Increasing Tobacco tax Putting a clamp on E-cigarettes Everything ANR does is based on science and data. The concern about E-cigarettes are new and there isn’t a lot of data on this product. ADH knows that the second hand vapor in e-cigarettes contains harmful substances. There is not a lot of data on e-cigarettes so this causes people to be unaware of dangers of e-cigarettes. Nicotine is not the only danger in e-cigarettes.

Chair Hanrahan asked if anyone had any questions for Onjewel Smith.

Bobby McGhee (ABI) commented about the lack of knowledge about e-cigarettes, most people know that nicotine is bad.

ATSC Commission Minutes – 1.23.14 Page 1 Dr. Lochala stated that nicotine is so addictive and remarked on how patients have to pass by the tobacco products or stand them near the health and medical products. This made him wonder, if the pharmacists are on his side.

Dr. Gary Wheeler (ADH) states that the Health Department knows second hand vapor contains really harmful things and this product should not be in an indoor public environment. Data is accumulating daily across the world and people around the country have learned you cannot trust tobacco companies.

Ann Purvis (ADH) statedthat the Health Department is making their environment smoke-free and people are getting used to that idea.That allows them to control what they can control. Autumn Sanson, Autumn reminded everyone that the rates are still not very good. The Treasury Office Rep will DFA has hired a consultant firm to look into different types of funds give an overview on our to invest into. This change can take place in FY 2015. There are no Funds problems with Commercial Paper (this is public sector debt). Another challenge was all the interest that taken for Medicaid Expansion. Autumn is trying to get with DHS on a payout schedule. Funds are doing very well with the limitations allowed by the state. Autumn always gets a prospectus on companies before money is used. Money is normally held in the money market for 30 to 90 days. Money should not be held too long or you will start to lose it. Autumn explained how the Commission is funded. So far the Commission has $153,732.82 for operating expenses that comes from the interest earned. Autumn says it is safe to say that this amount will double and that will be what the Commission will have for the fiscal year. Commissioners Update Commissioner Lochala nominated Chair Hanrahan for chair, Commission Chair is Susan Hanrahan, the Vice Commissioner Atkinson seconded the motion. Vice Chair Wheeler Chair is Roddy Lochala, and the Executive nominated Commissioner Lochala for Vice Chair, Chair Hanrahan Committee Member is Tim Atkinson. seconded the motion. Chair Hanrahan nominated Commissioner Atkinson for Executive Committee Member, Vice Chair Wheeler seconded the motion. Other Business Director Faye Shepherd gave the Director’s report beginning with the

ATSC Commission Minutes – 1.23.14 Page 1 continued discussion about Battelle. The cost for Battelle is over $300,000 in one fiscal year and that is more than the Commission is getting from the investments. Chair Hanrahan asked for comments on the Battelle Report. Commission Vice Chair Wheeler thinks the report has improved but there is still information that is not clear. She is not sure if this report is what the Legislature is looking for, so she approves of Director Shepherd beginning the RFP process. Commissioner Lochala thought the report was much easier to read. Director Shepherd received a disclosure from Howard Fishbein (Battelle) that a business unit within Battelle, which is a separate from unit working with the Commission, recently responded to a request to submit proposals to tobacco companies to conduct product research. Battelle does not have this contract as of now. Commissioner Wheeler is concerned about their interest in working with tobacco companies and how it is a conflict of interest with Commission. Battelle is a nonprofit organization. Commissioner Lochala is very concerned about them applying for the contract and thinks the Commission should terminate the contract for that reason. Dr. Bobby McGhee suggested that the Commission do something formal to recognize the AG’s office and for Autumn Sanson, Treasury Office Rep. Next Meeting Next meeting is April 8, 2014; we have Program presentations that will discuss the Programs’ focus and future. Fran Flener (Director of Drug Policy) will be our guest speaker.

Adjournment Motion to adjourn by Commissioner Chair Hanrahan Motion seconded by Commissioner Vice Chair Wheeler. Motion passed and meeting adjourned at 11:34 a.m.

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