Tobacco sales cut could hurt U. Texas System funds
(U-WIRE) AUSTIN, Texas -- Several University of Texas System schools' endowments that are funded by large tobacco company settlements could lose money if tobacco sales keep dropping, Texas Department of Health officials said Friday.
UT System schools in Dallas, San Antonio, Houston, Galveston, Tyler and El Paso were allocated money from two 1998 lawsuits against tobacco giants Phillip-Morris U.S.A., R.J. Reynolds Tobacco Co., and Brown and Williamson Tobacco Corp., for fraudulently stating that cigarettes do not cause cancer and are not addictive.
The settlement monies created 36 endowments, including 13 higher education endowments, eight health-related trust funds and the Children's Health Insurance Program.
While the CHIP program has been given priority in total funding, TDH spokesman Joe Walton said the Texas legislature, which meets in the spring, will decide if the other 35 endowments will receive cuts or find subsidy through other sources if the tobacco companies are unable to pay the full amount.
"The (tobacco settlement) appropriations were a projection based on the assumption that the tobacco companies would pay this amount," Walton said. "Political judgment will come to bear if cuts are needed and who would get the cuts."
The UT M.D. Anderson Cancer Center, which received the biggest appropriation of any UT System component, was allocated a $100 million endowment.
Dr. Margret Kripke, a professor of immunology at the cancer center, said since the center earns money from interest the endowment incurs, the Center is concerned about the decline in tobacco sales.
"We are currently using our entire tobacco endowment to support programs directly related to tobacco-related diseases," Kripke said. "All funds support research on lung cancer, smoking cessation, cancer prevention this would mean a cutback on all these programs."
In November 1998, 46 states and the District of Columbia signed a master settlement with the companies, providing $196 billion to the states for 25 years. Texas also received $40 billion in a July 1998 lawsuit against the same three companies.
In a report released Tuesday, the Texas Senate Finance Subcommittee on Tobacco Settlement Proceeds said Texas may lose $75 to $90 million in tobacco settlement proceeds. The report concluded that Texas officials may have to cut costs or rely on future tobacco proceeds to pay for the decline, which stems from a 14-percent drop in domestic cigarette sales since 1997.
Texas is supposed to receive $15 billion over the next 25 years. The first payment of $1.09 billion arrived in 1999, and the state expects subsequent payments of $333 million this year and $360 million next year. Total monies plus accrued interest were included in the $98-billion state budget for fiscal 2000 and fiscal 2001.
An arrangement also was made requiring the tobacco industry to adjust payments for inflation, changes in domestic profits and changes in the volume of cigarettes shipped for domestic consumption.