BY PAUL BARTON
Enquirer Washington Bureau
WASHINGTON -- The tobacco settlement legislation making its way through Congress is not going to produce anywhere near the revenues many are expecting, Ohio Gov. George Voinovich, chairman of the National Governors' Association, said Friday.
"The numbers they have been using have been so off the wall," Mr. Voinovich said of $516 billion associated with Senate tobacco legislation.
He based his remarks on a new briefing that NGA staff received from the Congressional Budget Office.
CBO officials outlined to NGA staff how they plan to "score" the bill developed by Sen. John McCain, R-Ariz., that recently emerged from the Senate Commerce Committee.
It's been widely reported that the bill would produce an estimated $516 billion in revenue over 25 years that would go toward anti-smoking programs, legal awards to smoking victims and various government programs unrelated to smoking.
About 40 percent, $196 billion, is supposed to go to settle various state claims against the industry.
But Mr. Voinovich released a memo showing how CBO expects the dramatic increase in cigarette taxes planned by the McCain bill -- $1.10 per pack -- to dramatically reduce demand among consumers. As a result, the CBO told NGA officials, the settlement will likely produce at most $230 billion to $298 billion over the next 25 years.
"These smaller projections make it less likely that there will be sufficient funding available to resolve state suits through a national package," a memo from NGA staff says.
No allocation of tobacco settlement revenues to various states -- whether from a $516 billion pot or some lesser figure -- has been developed, Mr. Voinovich's staff said.
A spokesman for Mr. McCain's Commerce Committee said its figures were based on projections from the Treasury Department of how tax increases would affect tobacco demand.
If the CBO estimates are closer to the truth, the committee would have no problems with that, said Pia Pialorsi, Commerce Committee aide.
"If this is true and demand for tobacco goes down, that's great. This is what's this all about," she said.
Scott Williams, a spokesman for the tobacco industry at Bozelle Sawyer Miller public relations firm, said he suspects CBO is trying to make the McCain bill look less onerous.
"I'm sure the last thing Congress wants to admit is that they are passing a half-a-trillion-dollar tax increase," he said. But Mr. Williams said the industry continues to think the $516 billion is an understatement, if anything, of what would be extracted from it under the McCain bill.
Regardless of what happens with cigarette taxes, he said, there are at least $115 billion in mandatory funding requirements that the industry would have to meet, not counting nearly $7 billion it would have to allocate for legal settlements.
