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State cigarette fee withstands appeal

ST. PAUL - Minnesota may continue collecting a 75-cent-a-pack cigarette fee after the U.S. Supreme Court Tuesday refused to hear a case brought to overturn the charge.

"The U.S. Supreme Court's decision was expected and proper," Gov. Tim Pawlenty's spokesman, Brian McClung, said in a terse statement. "In legal terms: case closed."

A Minnesota court had overturned the fee, but the Minnesota Supreme Court last year reversed that decision and put the fee back on the books. Tuesday's federal decision apparently ends the case.

Tobacco companies and distributors sued the state, claiming the "Health Impact Fee" enacted in 2005 violated a 1998 settlement that so far has provided the state billions of dollars to help offset smoking-related health costs, with payments to continue indefinitely.

Pawlenty proposed the fee to help balance the budget. It is expected to raise $223.3 million in the year that ends June 30, on target for what Pawlenty predicted.

Much of the argument since Pawlenty proposed the cigarette charge has been whether it is a tax or a fee, with the Republican governor taking grief from fellow conservatives for proposing a new tax. The state Supreme Court said it didn't matter.

The U.S. court made no comment other than it would not hear the case.

In the tobacco companies' appeal of the state high court decision, they claimed the state ruling raised a question about whether a state must keep its word in a private party contract.

David Sutton of Philip Morris said his firm is "very disappointed" with the high court's failure to hear the case.

"Philip Morris USA continues to believe the fee is a violation of the agreement we signed with other companies in 1998," Sutton said.

It was a different story for Minnesota legislators, who were happy that the state can continue spending the money.

"I'm glad we are not going to have to be looking for another source of funds to make up for funds we are using in other programs," Sen. Mary Olson, DFL-Bemidji, said. "Our budget is much tighter than most people realize."

The money is needed, she added, because "we have drawn down reserves, we have cut programs to the bone, we have increased our class sizes and we have delayed projects that have to be addressed."

Rep. Mary Ellen Otremba, DFL-Long Prairie, said money already received from the cigarette fee "is money well spent. We did some good things with it."

Besides getting extra money, one reason for the cigarette fee was to discourage smoking. However, Olson and Otremba disagree on whether that was effective.

Otremba said people have told her that they quit smoking because of the added fee. Olson, a former smoker, said if people are addicted to smoking that a fee won't help.

Don Davis
Don Davis has been the Forum Communications Minnesota Capitol Bureau chief since 2001, covering state government and politics for two dozen newspapers in the state. Don also blogs at Capital Chatter on Areavoices.