States Hurt by Poor Cigarette Sales
HARTFORD, Conn. (AP) -- A decrease in cigarette sales may turn out to be a costly trend for states and tobacco opponents intending to funnel millions of dollars from the tobacco settlement into health care and anti-smoking campaigns.
Under a little-noticed ``volume adjustment'' provision of the settlement, Connecticut stands to see up to 10 percent less than the $166 million it expected to collect between now and April, said Marc Ryan, the director of the governor's budget office.
Other states also stand to come out with less money as tobacco shipments and sales decline because of high price increases and anti-tobacco campaigns that started after cigarette makers settled lawsuits with the states last year.
The exact reduction -- not yet calculated -- will affect settlement payments due to states in April.
The situation puts some state budget-crunchers in limbo as they plan to spend money they do not yet have on everything from education and health care to new roads and prisons.
``Frankly, the prudent thing to do is not to spend specific dollars until they see what they will be,'' said Laurie Loveland, a lawyer who helped negotiate the tobacco settlement for the North Dakota attorney general's office. ``I think it's a mistake for state legislatures to become addicted to the tobacco money.''
Tobacco companies agreed to pay around $206 billion over 25 years to settle lawsuits against them by Connecticut and 45 other states over the costs states incurred to treat sick smokers.
Tobacco opponents said the decreased payout underscores the need for more of the settlement money to be spent directly on health care and anti-smoking campaigns instead of other state needs.
``The portion of money that has been allocated for tobacco prevention is less than 2 percent of the total money coming into the state, so I would certainly hope the minimal amount we are receiving would be the same,'' said Rochelle Ripley, the spokeswoman for Connecticut's anti-tobacco MATCH Coalition.
Altogether, Connecticut will get about $153 million this fiscal year, including $45 million expected to arrive in the next few weeks, Ryan said. Another payment is due in January. Those two payments won't be adjusted for volume.
But starting with the April installment, payments will be adjusted according to the number of cigarettes shipped in the United States in 1998 and 1999, Loveland said.
Tobacco companies will report the shipment numbers to the accounting firm PricewaterhouseCoopers shortly before the April payments are to be made. If shipment numbers go down, the accountants will adjust the payment accordingly, Loveland said.
For every full percentage number the shipments decrease, the payments will be decreased 0.98 percent, she said.
The shipment figures are not released to the public, said tobacco industry spokesman Scott Williams, and states cannot yet get a firm grasp on what their payment will be.
``The state may be just making an estimate on what they think the money's going to be. There's no hard figures on that yet,'' Williams said.
Shipments are tied to cigarette sales, and sales have been down.
Price increases and marketing restrictions have meant an 8.6 percent reduction in the number of cigarettes sold this year, the U.S. Department of Agriculture's Economic Research Service has estimated. Last year, sales were down about 3 percent.
Payments will get a boost, however, based on inflation. The settlement factors in inflation of 3 percent or the current inflation figure, whichever is higher.
In Connecticut, lawmakers were hesitant to spend settlement money they had not yet collected, and budgeted only a portion of the payout they expected.