High court upholds Legislature's use of tobacco settlement

Posted: Sunday, April 20, 2003

The state Supreme Court upheld a decision by the Legislature to earmark $93 million in future tobacco settlement funds for rural construction projects.

In a 3-2 ruling handed down Friday, the high court found against an anti-tobacco activist who wanted the Legislature to make more tobacco money available for health-related activities.

Eric Myers of the American Cancer Society attempted to block the bond sale in 2000, arguing it would commit future legislators to spend revenues in a specific way.

That would violate the state constitution's prohibition against earmarking funds, he argued.

Alaska is projected to receive $16 million to $36 million each year over the next 28 years under a settlement reached with four major tobacco companies.

But faced with a separate court ruling to improve rural schools, the Legislature three years ago decided it wanted to use some of the money right away.

So the Legislature arranged for the Alaska Housing Finance Corp. to sell revenue bonds that would be paid back with future tobacco payments. The Legislature then spent the proceeds from the bonds.

In the majority opinion, Justice Walter J. Carpeneti likened the tobacco money not to income but to state property, which the Legislature has the authority to sell. Justices Warren Matthews and Robert Eastaugh agreed.

But in a dissenting opinion, Justice Alexander Bryner argued that the deal crafted by the Legislature sells "the fruit of the state's revenue tree ... years in advance" rather than "one year at a time, as it ripens."

The Legislature improperly dedicated funds to a specific purpose by promising to use future tobacco payments to retire the bonds, Bryner argued.

Chief Justice Dana Fabe also dissented.

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