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2.12 Consider^ and discuss Order• approving 6y Resolution
the negotiated agreement between the State of Texas and its
counties and hospital districts into the Final Judgment in the
Tobacco Litigation. (County Judge>
Discussion Only - Official Court Transcript on record.
COMMISSIONERS' COURT AGENDA REQUEST
PLEASE FURNISH ONE ORIGINAL AND FIVE COPIES OF THIS REQUEST AND DOCUMENTS
TO BE REVIEWED BY THE COURT.
MADE BY: Robert A. Denson OFFICE: Coun Judpe
MEETING DATE: Aygust 10 1998 TIIVIE PREFERRED:
SUBJECT: (PLEASE BE SPECIFIC)
Consider and discuss Order approvin~bv Resolution the neQOtiated aereement
between the State of Texas and its counties and hospital districts into the Final
Judgment in the tobacco liti˘ation.
EXECUTIVE SESSION REQUESTED: (PLEASE STATE REASON)
NAME OF PERSON ADDRESSING THE COURT:
ESTIMATED LENGTH OF PRESENTATION:
IF PERSONNEL MATTER -NAME OF EMPLOYEE:
County Judge
Time for submitting this request for Court to assure that the matter is posted in accordance with TNe 5,
Chapter 551 and 552, Government Code, is as follows:
Meeting scheduled for Mondays:
THIS REQUEST RECEIVED BY:
THIS REQUEST RECEIVED ON:
5:00 P.M. previous Monday.

All Agenda Requests will be screened by the County Judge's Office to determine if adequate information has
been prepared for the Court's formal consideration and action at time of Court Meetings. Your cooperation will
be appreciated and contribute towards you request being addressed at the eazliest opportunity. See Agenda
Request Rules Adopted by Commissioners' Court.
ALLISON, BASS & ASSOCIATES, L.L.P.
C~~bawne~a ˘t ~˘ua
.LAMES P. ALLISON
ROBERT T. BASS
WAHRENBERGER HOUSE
2O$ WEST IdTH STREET
AusTrn, TEXAS 78701
(513).1ffi-0701
Fax (S1S)d80-0902
MEMORANDUM
TO: Commissioners Court Members
FROM: James P. Allisot~,~.,~_
RE: TOBACCO LITIGATION SETTLEMENT
DATE: July 28, 1998
C. REX HALL, JR.
ANTHONY J. NELSON
~~~'~~ ~`
~~,~~
It's official! On Friday afternoon, July 24, 1998, U.S. District Judge Robert
Folsom executed an Order approving the agreement between the State of Texas and its
political subdivisions. This Order incorporates the negotiated agreement between the
State of Texas and its counties and hospital districts into the Final Judgment in the
tobacco litigation.
I apologize to those county officials and my other county clients who have been
unable to reach me by telephone. The motions and order for Judge Folsom were still
being revised on Friday afternoon and my efforts were required to complete these tasks.
During the past three months, my associate Rex Hall and I have devoted our full
attention to obtaining this settlement. We appreciate your patience and understanding.
While some details remain for legislative consideration in January, all important
elements are resolved in the settlement documents. This settlement is not contingent
upon any further statute or appropriation. To provide further information on the
implementation of the settlement, we have prepared the attached question and answer
sheet. While no action is required to confirm this settlement, we have enclosed a draft
resolution or your coast eratton to co*^mrmnFate~h;c historic achievement
If you have further questions, please write or call. We will provide a response
as soon as possible.
RESOLUTION
Whereas, an historic agreement between the State of Texas and its political
subdivisions, concerning the tobacco litigation, has been approved by the U.S. District
Court; and
Whereas, this agreement will provide a $2.25 billion fund for the benefit of Texas
counties and hospital districts; and
Whereas, this agreement will partially repay Texas counties and hospital districts for
the tremendous cost of public health care for tobacco-related illness; and
Whereas, this agreement will provide a Permanent Health Care Account to benefit our
taxpayers and citizens in the future; and
Whereas, this agreement was achieved through the cooperative efforts of all
participants; now
Therefore, be it resolved that the Commissioners Court of
County, Texas recognize the excellent representation provided by the County Judges
and Commissioners Association of Texas and the Texas Association of Counties in this
effort, and further acknowledge the extraordinary public service rendered by Rep.
Robert Junell, Sen. Bill Ratliff, Speaker Pete Laney and our other state leaders in this
achievement.
Read and Adopted this day of , 1998
County Judge
Attest:
County Clerk

QUESTIONS AND ANSWERS ON THE
TOBACCO LITIGATION SETTLEMENT
1. Does the Commissioners Court need to approve the agreement?
No. The agreement has been incorporated into the settlement between the State of
Texas and the tobacco companies. You may be required to execute a release to
receive the initial payment in January, 1999.
2. Does this agreement release all claims by counties and hospital districts against thy,
tobacco companies?
Yes. The U.S. District Court has ordered that all claims by political subdivisions be
released in exchange for this settlement.
3. Can the $2.25 billion total settlement for counties and hospital districts be reduced or
increased?
Possibly. If the Health Care Finance Administration (Medicaid) recovers a porria~~
of the settlement from the State of Texas, the Permanent Trust Account will be
reduced proportionately. There aze also inflation clauses that may increase the
account in the future. These factors should not affect the $300 trillion payment in
January, 1999.
4. Are these funds restricted to health caze use?
No. Since the initial payment represents past damages, it is not restricted and may
be budgeted and expended for any lawful purpose. However, this is certainly the
largest payment that will be made. A prudent policy would include placing some
portion of this payment in a reserve fund for future health care costs. The future
payments from the Permanent Trust Account will be based upon county expenditures
for the previous calendaz yeaz and are not restricted.
5. If we use these payments for health caze costs, can we count this expenditure toward
the future annual distribution from the Permanent Trust Account?
Yes. Unlike reimbursement from other sources (Medicaid, State Assistance Fund,
other entities) payments from this settlement can be used to fund the county health
care budget and will be included in the distribution from the Pettnanent Trust
Account.
Page 1
6. Why is the first payment based upon population according to the 1990 census and
future payments based upon cost reimbursement?
Since no system presently exists to compare costs, the first payment will be based
upon population. Beginning in 1999, hospital districts will report their taxes
collected and counties will report their expenditures to create a cost reimbursement
system.
7. Why will hospital districts report taxes collected and counties report expenditures?
The permanent trust account is designed to partially reimburse local health care
efforts. The taxes collected by the hospital district constitute its local taxpayer
effort. Since counties use a unified tax rate, expenditures must be reported to
determine local taxpayer effort.
8. Why do counties add an additional 15% to their total unreimbursed health care
report?
Since counties primazily purchase health caze services, this adjustment will include
their approximate administrative costs, already included in the hospital district
reports.
9. Will our county receive credit for services provided by the purchaser of our public
hospital?
Yes. Services rendered as part of the purchase of a public health facility will be
reported as an expenditure at Medicaid rates.
10. Will our reported expenditures be limited to our indigent health care costs?
No. All county health caze costs for the general public will be reported, including
EMS, jail inmate health caze, clinics, medical assistance programs, etc.
11. Will our county payments be reduced for attorney fees?
No. While some lazge hospital districts retained attorneys at their own costs, our
firm agreed to represent counties at our normal, discounted rate to be paid by the
Texas Association of Counties.
12. Will counties located wholly within a hospital district receive any payment?
No. Since the hospital district is required to provide all public health services, it
will receive all payments. The hospital district may include unreimbursed county
inmate health care costs in its report.
Page 2
6. Why is the fast payment based upon population according to the 1990 census and
future payments based upon cost reimbursemen[?
Since no system presently exists to compare costs, the first payment will be based
upon population. Beginning in 1999, hospital districts will report their taxes
collected and counties will report their expenditures to create a cost reimbursement
system.
7. Why will hospital districts report taxes collected and counties report expenditures?
The permanent trust account is designed to partially reimburse local health care
efforts. The taxes collected by the hospital district constitute its local taxpayer
effort. Since counties use a unified tax rate, expenditures must be reported to
determine local taxpayer effort.
$. Why do counties add an additional 15% to their total unreimbursed health care
report?
Since counties primarily purchase health care services, this adjustment will include
their approximate administrative costs, already included in the hospital district
reports.
9. Will our county receive credit for services provided by the purchaser of our public
hospital?
Yes. Services rendered as part of the purchase of a public health facility will be
reported as an expenditure at Medicaid rates.
10. Will our reported expendituues be limited to our indigent health care costs?
No. All county health care costs for the general public will be reported, including
EMS, jail inmate health care, clinics, medical assistance programs, etc.
11. Will our county payments be reduced for attorney fees?
No. While some lazge hospital districts retained attorneys at their own costs, our
fum agreed to represent counties at our normal, discounted rate to be paid by the
Texas Association of Counties.
12. Will counties located wholly within a hospital district receive any payment?
No. Since the hospital district is required to provide all public health services, it
will receive all payments. The hospital district tttay include unreimbursed county
itttnate health caze costs in its report.
Page 2
13. Since our county has a hospital district in part of the county, will we receive any
payments?
Yes. The initial payment will be divided between the county and hospital district on
the basis of population. If you reach an agreement on the percentage division by
population, forwazd your signed agreement to the Texas Depaztment of Health. If
you cannot agree, the Department of Health will determine the population
percentage. In future years, the hospital district will report its taxes collected and
the county will report its health care expenditures.
14. Why aze all reports and distributions based upon a calendaz year?
The tobacco company payments will be received in January of each year. Since
counties and hospital districts use a variety of fiscal years, the calendar year is a
reasonable compromise.
15. Does this settlementaffectour indigenthealth care Program and.tesponsibilities.
No. This agreement is separate from these statutory responsibilities. However,
these programs are under study by the legislature.
16. Do these payments increase the county effective tax rate?
No. These payments are not taxes and aze not included in the calculation of the
rollback rate. However, expenditure of these funds must be included in the county
budget.
17. Who is responsible for this settlement?
Many persons. Attorney General Morales filed the initial lawsuit and secured the
state settlement. The County Judges and Commissioners Association of Texas
monitored the lawsuit and participated in the negotiations. The Association of
Counties provided fmancial support. The hospital districts provided information and
legal support. Rep. Robert Junell, Sen. Bill Ratliff, Speaker Pete Laney, and the
other state leaders demonstrated wisdom and good judgment by formulating the
Permanent Trust Account and committing the enhanced payments to this settlement.
Commissioner Betty Armstrong and my associate attorney, Rex Hall, provided
energetic support to our efforts.
Page 3