States to Lose $197M in Tobacco Settlement Funds
Sixteen of the 46 states that joined 1998's $206 billion, 25-year national tobacco settlement will lose $197 million in payments after failing to pass specific legislation in time, the AP/Richmond Times-Dispatch reports. In Pennsylvania, for example, the state received $111 million instead of the expected $130 million in December, while California and New York both received $203 million -- $44 million less than expected. The other affected states included Alabama, Arizona, Connecticut, Delaware, Hawaii, Kentucky, Massachusetts, Michigan, North Carolina, Oregon, Vermont, Wisconsin and Wyoming. "We are dealing with such enormous figures here, that what appears to be a fairly small shift ends up being a relatively big adjustment," Sue Ellen Wooldridge of the National Association of Attorneys General said.
Under the settlement, states needed to pass by June 1999 a law that would force tobacco manufacturers not participating in the settlement to sign on to the agreement or make annual payments into an escrow account equal to the amount of market share lost by the industry. States agreed to the provision in order to quell industry fears that the non-participating companies would "gain an advantage" because they would not face certain advertising and marketing restrictions(AP/Richmond Times-Dispatch, 1/11). Although all 46 states have now enacted the law and will receive full payments in the future, the 16 that lost funding last month may enlist the NAAG's help and sue to "shake the money loose." Sean Connolly, a spokesperson for Pennsylvania Attorney General Mike Fisher, said, "We're confident we will prevail" (
AP/Baltimore Sun, 1/11). Stewart Freeman, a Michigan assistant attorney general, added, "This is a brawl. It's not lost yet" (Wendland-Bowyer,
Detroit Free Press, 1/11).
In Maryland, Gov. Parris Glendening (D) told legislators yesterday that he plans to provide $40 million -- funds initially earned from the tobacco settlement -- for cancer research and other efforts to reduce the number of smokers in the state. While Maryland received its full December payment, the state has held the funds in escrow because of an ongoing fee dispute with lawyer Peter Angelos. The state will provide $16 million for cancer research and other programs, including $12 million for the University of Maryland Medical System and Johns Hopkins Hospital, and an additional $26 million in the FY 2002 budget that Glendening will announce next week. The announcement prompted a "quick and positive" response from legislators. In 2001, Maryland will place $53 million in escrow. Although Glendening will allocate half the funds to antitobacco programs, some groups that had expected tobacco settlement money will not receive full funding. Glendening spokesperson Michael Morrill said that the cuts will not "harm" many of the affected programs, others will receive "what they were promised." He added, "Everybody who got a deferral [in this year's budget] is going to get that money in 2002. We think that this is a very balanced approach" (Thompson,
Baltimore Sun, 1/11).
Meanwhile, the Campaign for Tobacco-Free Kids reports today that only six states spend even the "minimum amount" recommended by the CDC on antismoking campaigns. According to the report, most states spend less than half the amount recommended by the CDC, while at least two -- Michigan and North Dakota -- support no antismoking programs with their share of the national tobacco settlement (Winter, New York Times, 1/11). "[T]he Legislature and governor [in Michigan] have seen fit not to spend any of the settlement proceeds on tobacco prevention or other public health initiatives," Cliff Douglas, president of the Ann Arbor-based Tobacco Control Law and Policy, said, adding, "It's not being used for the purposes that the settlement was reached, which was to combat the tobacco epidemic" (Detroit Free Press, 1/11).
U.S. Surgeon General David Satcher has "sharply criticized" state lawmakers for "neglecting prevention" and spending "too much" on unrelated programs. "We're going to pay sooner or later if we allow children to start smoking," he said, adding, "The tobacco settlement funds represent an opportunity that we've never had before to save lives, and we're missing it." Satcher and antitobacco groups worry that lawmakers may use settlement funds to offset reductions in tax revenue if the economy slows. Montana and Maine have already cut back on efforts to prevent smoking, and Virginia may use settlement funds to help "phase out" a property tax on cars. "This is definitely something we're going to see played out through all of the states as the economic downturn affects state revenues," Lee Dixon, health policy director for the National Conference of State Legislatures, said. Under the tobacco agreement, states can spend their settlement funds "as they see fit," and states have allocated less than 10% of the nearly $8.2 billion in settlement money allocated in FY 2000 and 2001 for antismoking efforts (New York Times, 1/11).