Monday, March 22, 1999
Fight over tobacco money begins
Panel will be named to find uses for $9.8B
BY MICHAEL HAWTHORNE
Enquirer Columbus Bureau
COLUMBUS — For all the money Gov. Bob Taft wants state government to spend during the next two years, Ohio's $9.8 billion windfall from tobacco companies is conspicuously absent from his budget proposal.
Mr. Taft and leaders of the Republican-controlled General Assembly have urged caution until it's clear the state will be able to keep all the cash. But the feeding frenzy begins this week, when the governor and legislative leaders assemble a 15-member panel that has 60 days to recommend how the payments should be spent.
It's an understatement to say there is no shortage of ideas for the billions promised to Ohio and other states during the next quarter-century, even though they have yet to extract a dime from cigarette makers.
Health groups want a slice for smoking-prevention programs. Mr. Taft has suggested spending some on school repairs and health care for uninsured children. And anti-tax groups think the windfall should go to taxpayers.
“Whenever you're talking about big money like that, folks come out of the woodwork,” said Tim Keen, assistant director of the state Office of Budget and Management.
Ohio's first check from the settlement — $120 million — is expected later this year. State lawmakers will decide how that money and subse quent annual payments ranging from $323 million to $422 million will be spent.
During his State of the State address this month, Mr. Taft said he wants the tobacco panel to focus on programs that reduce the number of underage smokers. Other governors, including Indiana Gov. Frank O'Bannon, have included similar proposals in their plans for the money.
Minority Democrats have their own ideas. While he may have competing proposals for how to spend the windfall, State Sen. Mark Mallory, D-Cincinnati, supports a plan by State Senate President Richard Finan, R-
Evendale, and other GOP leaders to invest the proceeds and spend only the interest.
“I think we should spread this around to programs that can make a difference, such as helping clinics in urban neighborhoods,” Mr. Mallory said. “But we need to be very responsible about how we handle it.”
The biggest concern for states is the federal government's attempt to take at least half the tobacco payments to recoup the cost of Medicaid coverage for people with smoking-related illnesses.
Medicaid is a health care program for the poor, elderly and disabled funded jointly by the federal government and the states.
President Clinton's latest federal budget proposal counts on $18 billion from the tobacco settlement during the next five years. But state officials contend the money is theirs alone to spend because it was won in a settlement of lawsuits filed by states.
The Clinton administration lost part of the battle last week. On a 71-29 vote, the U.S. Senate rejected an effort to force states to spend half the settlement on health programs or assistance for tobacco farmers.
“Each state must be given the flexibility to tailor its spending to the unique needs of its citizens,” Kentucky Gov. Paul Patton told a Senate Appropriations Subcommittee. “For example, to force (tobacco-growing) Kentucky or Virginia to spend all their funds on health insurance for children would represent flawed federal policy when they need to assist farm communities,” Mr. Patton said.
Health groups say spending the money on anti-smoking programs is especially important in Ohio, which leads in smoking among males and is third among both genders. Nearly 20,000 die in Ohio each year from smoking-related illnesses.
A coalition including the American Cancer Society, American Lung Association and American Heart Association wants state lawmakers to give them the first three settlement checks — or more than $900 million — for an anti-smoking foundation.
The group plans to release a study this week of the economic effects of smoking in Ohio, such as the estimated $600 million the state spends each year on Medicaid-financed treatments for smoking-related illnesses.
“Unless we invest this money wisely now, even the immense tobacco settlement won't cover those expenses in the future,” said Jennifer Tisone Price, a lobbyist for the American Lung Association of Ohio.
The group's ideas include:
• Providing incentives for businesses to implement smoke-free workplace policies.
• Expanding compliance checks to ensure stores aren't selling tobacco products to children.
• Countermarketing at colleges and convenience stores.
• Increasing the availability of nicotine replacement products and smoking-cessation programs.
In an ironic twist, a drop in cigarette sales could lead to states getting less money from the $250 billion settlement.
“That's why I don't think we should rush into spending this money,” Mr. Finan said. “There's just too much uncertainty.”
There also is a possibility the windfall could be swept into the debate over Ohio's state budget surplus.
Mr. Taft wants to use the surplus — estimated to be at least $400 million this year — to refurbish school buildings. Conservatives want the money used to reduce taxes.
The tobacco settlement could be included in a compromise.
No matter what happens, budget experts say, state officials should be wary of spending the money on programs that increase in cost over time.
“This is just like the lottery — a big pot of money that doesn't involve raising taxes,” said Don Berno, president of the Ohio Public Expenditure Council, a nonpartisan group that studies the state economy and taxes.
“But like the lottery, money from the tobacco settlement won't increase with inflation,” Mr. Berno said. “We could have a bunch of new programs but end up with taxpayers footing the bill down the line.”
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