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CLT Update
Friday, March 12, 1999


By being one of the first states to sue and investing so much time and money, Massachusetts assumed a lot of risk in this case. This is a form of compensation. I'm glad the citizens of the Commonwealth will benefit from the hard work the tobacco team did."

Former Attorney General L. Scott Harshbarger
News Release: March 11, 1999
Office of the Attorney General

Today we learn from the Boston Herald [story below] that Massachusetts is set to receive an additional $359 million "bonus" from the "tobacco settlement" reimbursement.

The state's $7.6 billion share of the $206 billion national settlement will arrive in $250-$350 million annual installments for the next 25 years, with an additional $323 million a year paid out every year afterward, in perpetuity. The settlement was pursued allegedly to seek reimbursement for the cost of providing taxpayer-funded health care to uninsured smokers with tobacco-related illnesses.

This just-announced additional bonus is specifically targeted as reimbursement to the states for their legal expenses. ["The industry would pay all attorney fees both state and private counsel and reimburse states for their costs." From the news release: "Attorneys General Announce Tobacco Settlement Proposal"; Washington, D.C., November 16, 1998]

We taxpayers funded the attorney general's lawsuit, and former AG Harshbarger has acknowledged that the bonus is "a form of compensation" for "investing so much time and money" in his pursuit.

Other states also have begun the debate over what to do with their reimbursement windfall. In Michigan, the Detroit News agrees with us that the entire reimbursement should be given back to the taxpayers who compassionately provided the funds when the money was needed [editorial below Herald story].

Chip Ford --

The top six states receiving additional bonuses are: New York, $471,532,567; California, $444,552,667; Washington, $394,959,031; Massachusetts, $358,636,883; Connecticut, $284,502,080; and Maryland, $267,951,245.

The Boston Herald
Friday, March 12, 1999

Frontline Bay State gets $359M bonus from tobacco suit
by Tim Cornell

Massachusetts will get a $359 million bonus because it played a leading role in settling the national tobacco lawsuits.

Former Attorney General Scott Harshbarger made Massachusetts the fifth state to join in the liability lawsuit against the top cigarette makers.

If the companies had not settled, the state would have taken them to trial last month.

Instead, the companies agreed to settle and Massachusetts won $7.6 billion, the fourth-largest award in the nation.

The money will be paid out over 25 years.

"I'm proud of the fight we waged against the tobacco industry," Harshbarger said in a statement yesterday.

"By being one of the first states to sue and investing so much time and money, Massachusetts assumed a lot of risk in this case."

Of the 46 states involved in the tobacco litigation, a three-member panel decided Massachusetts was the third-largest leader in the efforts to sue the tobacco companies and deserved the extra reward.

The $359 million is the state's share of an $8.6 billion fund created as part of the nationwide settlement and was designed as an extra reward for states that played a leading role in the lawsuits.

Harshbarger, now a professor at Northeastern University, called the extra millions "a form of compensation" for the state's effort.

The Detroit News
Sunday, November 22, 1998

Up in Smoke

Tax-and-spenders are salivating at the prospect of $8.1 billion in tobacco settlement bucks swelling the state treasury for 25 years to come. The lung lobby can hardly wait to launch yet more anti-smoking programs.

But every penny rightfully belongs back in taxpayers' pockets by way of a tax cut.

The windfall supposedly represents tobacco industry reimbursement for the Medicaid costs of treating smoking-related illnesses. Of course, neither Michigan nor any of the other money-grubbing states on the settlement list can actually account for such costs. In fact, smokers, who tend to die early, probably save the state money.

But any excuse to raid a corporate till will do. The irony, of course, is that Michigan owns $374 million worth of tobacco industry stock. So Michigan is participating in a lawsuit that is obtaining damages from firms in which it is an investor.

An additional irony is that the state collects more than $534 million in tobacco taxes each year from firms it has sued for selling the product that yields the taxes.

The settlement has yet to be signed, but lawmakers' and lobbyists' wish lists are at the ready. Predictably, a legion of so-called nonprofit groups already are grumbling that there isn't enough green to go around.

Examples of other states' uses of the tobacco settlement windfall are uninspiring. Mississippi, for example, has used its $4 billion payoff (the nation's first) for street lights, roof repairs, video equipment and a series of formal dinners to inculcate proper etiquette in (non-smoking) teens.

The argument will be made that Michigan should use some of the windfall for stepped-up anti-smoking campaigns. But some $7 million is spent by the state on smoking cessation and prevention efforts - along with hundreds of millions more expended by the federal government.

Still, most anti-smoking programs appear to be largely ineffective, and more money won't make them any better. While smoking among Michigan adults fell 42 percent between 1965 and 1995, the rates are now climbing right along with spending levels. Americans in general, and teens in particular, exhibit a rather strong resentment of government nannyism.

The settlement should be used to fund a cut in the state income tax rate. Gov. John Engler has already proposed a five-year phased reduction of one half of a percentage point in the rate. The settlement revenues could be used to either enlarge or accelerate that cut. They should not be used, however, as a substitute for the cost-cutting that would have been necessary to fund the tax cut that has already been promised.

The state did not deserve this tobacco windfall, but Michigan taxpayers deserve a prompt and significant tax cut. Any other use of the tobacco settlement would simply allow it to go up in smoke.

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