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DLS warns Cigarette Restitution Fund revenues are declining; FY26 uses strained
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Summary
DLS reported that Cigarette Restitution Fund (CRF) receipts are falling and that contingent BRFA reductions squeeze CRF uses in FY26, prompting a planned BRFA amendment to waive a statutory spending allocation for one year.
Department of Legislative Services analysts told the Health and Government Operations Committee that the Cigarette Restitution Fund (CRF) is experiencing a multi‑year revenue decline and that the FY26 allowance leaves some statutory CRF uses funded at below required levels unless the legislature waives certain allocations.
DLS presented revenue trends that show CRF receipts are expected to decline by more than 8 percent over the projection period, and staff said fiscal 24 CRF receipts came in about $25 million below projections and FY25 expected revenues also look lower than budgeted. Anne Braun summarized that the state addressed the shortfall in FY24 by substituting general fund for certain CRF uses (notably Medicaid) and that FY25 deficiencies propose additional withdrawals from CRF that would again be backfilled with general funds.
The FY26 allowance restores some CRF support for those uses but includes contingent BRFA reductions. DLS noted a contingent $13 million reduction in support for statewide academic health centers (UMS and Johns Hopkins) if BRFA eliminates a statutory mandate for cancer research grants. DLS also said the statutory restriction that 50 percent of CRF spending must go to enumerated uses would be met at only about 42–43 percent under the FY26 plan; MDH and the Department of Budget and Management plan to propose a BRFA amendment to waive that requirement for FY26 only.
DLS additionally briefed members on ongoing litigation and arbitration with tobacco manufacturers that could yield approximately $25 million for the CRF; DLS noted the FY26 budget does not currently recognize that potential recovery but recommended committees consider recognizing it under Medicaid if received.
Members asked for more detail on the CRF shortfall, the proposed BRFA waiver language and the effects on academic health center funding; DLS said it will provide the relevant appendices and recommended monitoring of the arbitration outcomes and future CRF receipts.
