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S P E C I A L Tobacco Under Attack

Clinton to recommend sharing tobacco money with states

Graphic

In this report:

January 12, 1998
Web posted at: 11:27 p.m. EST (0427 GMT)

WASHINGTON (CNN) -- President Clinton is expected to recommend that the federal government share some of the $368.5 billion tobacco industry settlement with the states, although exactly how much is not clear.

A government official, speaking on condition of anonymity, said Monday that Clinton plans to ask that the fiscal 1999 budget include "significant monies for the states."

The official declined to comment on a Wall Street Journal report that Clinton planned to offer the states $20 billion over five years.

But Mississippi Attorney General Michael Moore said Monday that White House officials told him at a meeting last week that Clinton is willing to give the states $196 billion of the proposed $368.5 billion settlement.

Moore said the compromise gives states a share of federal Medicaid money, but that share must be used for children's health care.

His figures were different from published reports that Clinton's upcoming budget would allocate one-third of the settlement's first proceeds to the states.

Moore said he was confident the math hadn't changed, but if it had, "it wouldn't go over well at all" with the states.

Administration officials refused to respond to Moore's comments Monday.

An end to the tug of war?

The National Governors' Association and other state groups have told Clinton they should get all the funds, because the federal government chose not to participate in the lawsuits.

State attorneys general and the tobacco industry negotiated the settlement last June. If approved by Congress, it would settle a host of lawsuits and give the industry protection from much future litigation.

In exchange, cigarette and smokeless tobacco companies would pay $368.5 billion over 25 years and make unprecedented health, advertising and marketing concessions.

But squabbling between states and the federal government has broken out over the spoils of the settlement, and Clinton's proposal is meant to end the tug-of-war.

"They (the states) did some of the work and they should get some of the money," a Clinton administration official said. "We do recognize the states have made an important contribution."

However, she said, the federal government also is entitled under existing law to recover money collected by states in Medicaid health program lawsuits. It also wants recognition for such federal action as the Food and Drug Administration's decision to regulate nicotine, which contributed to the settlement.

Proposal called 'extremely fair'

"We want to reach a mutually agreeable solution to the various claims the states have and the federal government has," she said. She added that the budget proposal would be an "extremely fair" way to reconcile the claims.

The budget proposal is also expected to propose an increase in cigarette prices. But the increase may come from direct payments by tobacco companies that would be passed on to consumers, rather than from higher taxes.

Clinton said last year he thought the settlement should be tougher on the tobacco industry, and backed a policy that would raise cigarette prices by $1.50 a pack over 10 years.

A U.S. official said last week that Clinton's budget would propose a significant rise in cigarette prices in line with that thinking.

Clinton's budget proposal for the fiscal year beginning October 1 is due to be sent to Congress on February 2.

Copyright 1998 Reuters Limited. All rights reserved.

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