State To Receive First Tobacco Settlement Payments

Attorney General Spitzer announced today that the first payments from the tobacco industry are scheduled to be made to New York State, New York City and all 57 counties on Tuesday, December 14, 1999.

The payments are expected to total $315 million, with New York State receiving $161 million (51 percent, New York City receiving $84 million (27 percent) and the remaining $70 million (22 percent) being divided among the counties.

"I am extremely pleased that, after such a long and hard struggle, the tobacco settlement payments are finally ready to flow to New York State and its local governments," Spitzer said. “Our taxpayers will now finally see Big Tobacco starting to repay them for decades of being forced to pay the bill for the costs of smoking-related illnesses.”

This $315 million payment is just the first payment required under the tobacco Master Settlement Agreement (MSA) agreed to by the industry, 46 states and six territories. The next payments are scheduled to follow on or about January 10, 2000 and April 15, 2000.

The tobacco companies will make payments in January and April of every year through 2003, and then will make a single payment every April thereafter. New York State, New York City and the counties are currently projected to share $25 billion over the next 26 years.

The December 14, 1999 payment of $315 million is about $9 million more than had been originally projected under the MSA. The settlement agreement had required the tobacco companies to deposit $306 million into an account earlier this year, and investment earnings since that time have increased the funds to $315 million. As a result, New York State and its local governments will receive about 3% more than originally expected.

Although the December payment is higher than expected, Attorney General Spitzer warned local governments that future payments may be substantially reduced. Starting in January 2000, all payments are subject to a "volume adjustment," which will reduce payments if domestic cigarette consumption decreases.

Spitzer noted that preliminary estimates indicate that 1999 cigarette sales are about 15% less than the base volume under the MSA, which means that the January and April 2000 payments may also be about 15% less than expected. Thus, Spitzer is recommending that local governments should count on receiving no more than 85% of their base amounts as they plan their budgets for next year.

Spitzer said that the drop in cigarette sales indicate that the battle against smoking is working, "The significant reductions in cigarette consumption means that fewer children are starting to smoke, more adults are quitting smoking, and even addicted smokers are smoking less.

"These reductions will decrease future government expenditures for Medicaid and other costs of smoking-related illnesses, and will lead to substantial improvements in the long-term health of millions of New Yorkers."

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