State officials lobby to help tobacco industry stay solvent |

State officials lobby to help tobacco industry stay solvent

DENVER – State officials found themselves in an unusual predicament last week, lobbying on behalf of Philip Morris so the cigarette company wouldn’t go broke and fail to make payments it owes Colorado after the state sued it in 1995.

Citizens in Illinois filed a class-action lawsuit against the tobacco giant, saying the company misled smokers about the dangers of “light” cigarettes. A judge found Phillip Morris guilty and ordered the company to pay $10.1 billion to the 1.1 million citizens in the suit.

Representatives of the cigarette company, however, said they planned to appeal the case, so the judge told them they needed to post a $12 billion bond – the amount of the award plus interest. Philip Morris said posting such a large bond would force it into bankruptcy and jeopardize payments the company owes states.

In 1995, then-Colorado Attorney General Gale Norton filed suit against the major tobacco companies to recover Medicaid funds the state spent to take care of ill and dying smokers. The state and tobacco companies forged an agreement in 1998 that gives Colorado $2.6 billion over a 25-year period.

Last week, the Illinois judge agreed to cut the bond amount to $6.8 billion, which Philip Morris officials say they can afford and still make the required payments.

State officials kept a close eye on the Illinois lawsuit because they were counting on part of a $35 million payment to fill the state budget shortfall. If Philip Morris had been unable to make those payments, legislators would have been forced to make more cuts to an already sparse budget.

Colorado legislators have cut almost $1 billion from the state budget since the session began in January. The Senate reviewed and amended the proposed budget – part of which involves selling future tobacco funds for a lump sum of money today – and sent it to the House of Representatives last week.

“This highlights the risks the state faces in relying on these tobacco payments,” said State Treasurer Mike Coffman. “We now find ourselves heavily dependent on tobacco money, particularly given our bleak budget situation. Had my advice been taken, we would never have gotten into a situation where Colorado’s interests are so closely aligned with those of the tobacco companies.

“I’m certain we’ll face continued uncertainty with respect to our tobacco payments in the years ahead,” Coffman added. “Lawsuits of this sort are exactly why I sought to securitize our tobacco settlement payments several years ago. Unfortunately, due to the industry’s continuing legal difficulties, completing such a transaction today will be far more difficult – and certainly more expensive – than it would have been when I first advocated it.”

Two amendments presented in the House and being debated in the Senate this week would cut an additional 22 percent from tobacco prevention and cessation programs, leaving the programs with $3.9 million for the year.

Of the $1.1 million cut, $500,000 would go to the Judicial Department to provide legal services for victims of domestic violence, $500,000 would be diverted to the Medicaid Mental Health program, and $100,000 would go to the State Council on the Arts.

Tobacco cessation program directors are urging Gov. Bill Owens to veto Senate Bill 268, which will securitize about 47 percent of the tobacco settlement payments for the next 10 years. The bill passed the House on third reading April 15; the House didn’t debate the bill, meaning it passed without opposition.

Tobacco cessation program directors say securitization will jeopardize the health of Coloradans while giving up more than $530 million in potential future revenue.

They also say tobacco cessation programs have been targeted unfairly by budget cutting legislators, citing numerous other programs funded with tobacco settlement funds that aren’t being cut at all or, in the case of the Children’s Basic Health Plan, are being increased.

“The states’ use of tobacco settlement proceeds to fund tobacco prevention has been woefully inadequate and declining steadily,” Colorado Tobacco Education and Prevention Alliance officials said Wednesday. “Only 4 percent of 2003’s settlement revenue was used to fund tobacco prevention, and that number has declined as several states have cut or eliminated funding for tobacco prevention.”

Jane Stebbins can be reached at (970) 668-3998 ext. 228 or

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