Bill Gives States Entire Settlement

By Curt Anderson AP Tax Writer
Thursday, March 4, 1999; 6:48 p.m. EST

WASHINTON(AP) -- The federal government would get none of the $246 billion promised by tobacco companies to states to settle health-related lawsuits under a bill approved Thursday by a key Senate committee.

``This is money the states won on their own, with no help from the federal government,'' said Sen. Kay Bailey Hutchison, R-Texas, the prime sponsor. ``This will settle the issue once and for all.''

The Senate Appropriations Committee attached Hutchison's measure on a voice vote to a $1.9 billion emergency spending bill that includes aid for economically strapped U.S. farmers, victims of Hurricane Mitch in Central America, the American steel industry and Jordan after King Hussein's death.

The Clinton administration has asserted that the federal government deserves a slice of the money paid by tobacco companies. The administration points out that under Medicaid law states must share proceeds of any lawsuits involving the program because half its costs are borne by the federal government. Many of the states' lawsuits relied on the costs of tobacco-related illnesses to the Medicaid program in seeking money from the tobacco companies.

But all 50 governors and hundreds of state officials have been battling to keep the money -- they say Washington played no part in the drawn-out legal fight -- and spend it as they see fit. The tobacco companies agreed to pay $40 billion over 25 years to settle four state lawsuits and another $206 billion in a broader deal with the other 46 states.

Hutchison's measure would bar the Clinton administration from using Medicaid law to recoup the money. Supporters said it was critical to move the measure swiftly because state legislatures nationwide are making decisions on how to spend their shares.

``Now is the time,'' said Sen. Ernest Hollings, D-S.C. ``The states are wondering what to do.''

The Appropriations Committee brushed aside warnings from some senators to go slowly in rewriting Medicaid law. Senate Finance Committee Chairman William Roth, R-Del., had warned colleagues that the move could have unforeseen ramifications for the program.

``No decisions should be made until the facts are on the table,'' Roth wrote.

Appropriations Committee Chairman Ted Stevens, R-Alaska, asked Hutchison to withdraw the measure in light of Roth's objections, but she refused. The committee also defeated an effort by Sen. Tom Harkin, D-Iowa, to limit the bill's effects to the 1999 and 2000 fiscal years.

Stevens said he expected the tobacco amendment to pass the full Senate when the emergency bill goes to the floor later this month, but whether the House would go along is unclear.

The overall emergency spending bill has become a political touchstone because Stevens proposes to pay for it with money from welfare and food stamp programs that isn't supposed to be spent this year, as well as 5 percent reductions in some other domestic programs.

A planned committee vote on the House version was postponed Thursday until next week so that similar spending offsets could be found, instead of taking most of the money out of projected budget surpluses.

White House press secretary Joe Lockhart accused GOP lawmakers of causing a ``political fight'' by trimming other accounts. ``The need is real, '' he said. ``These are issues that should be above the partisan fighting here in Washington.''

But Republicans are insisting on preventing any supplemental spending bills from violating the fiscal 1999 budget caps.

``Actually, it's not politics at all,'' said House Majority Leader Dick Armey, R-Texas. ``It's called budget responsibility.''

Copyright 1999 The Associated Press

Senate panel votes to keep tobacco funds for states

07:38 p.m Mar 04, 1999 Eastern
By Adam Entous

WASHINGTON, March 4 (Reuters) - At the urging of U.S. governors, a key Senate panel voted on Thursday to bar the federal government from grabbing a share of the states' $206 billion settlement with tobacco companies.

The Senate Appropriations Committee approved the controversial amendment, by Republican Sen. Kay Bailey Hutchison of Texas, as part of a broader $1.8 billion package to aid hurricane-devastated Central America and Middle East ally Jordan.

``The states have worked for years to reach a settlement with the tobacco industry, with no help from the federal government,'' Hutchison said after the vote. ``The Clinton Administration's attempt to seize state tobacco funds is an egregious abuse of federal authority.''

``This will settle the issue once and for all.''

State governors have urged President Bill Clinton to keep the federal government's hands off the money, proceeds from last year's record settlement with major cigarette companies.

That deal settled lawsuits over medical costs for treating people with smoking-related diseases.

The federal government argues that it is entitled to some of that money to offset federal expenditures under Medicaid, a government health care programme for the poor that is funded jointly by the states and Washington.

Clinton's fiscal 2000 budget includes $18.9 billion over the 2001-2004 period from the settlement.

Under pressure from states and some Democrats in Congress, the White House said it would be willing to let states keep the money if they agreed to spend it strictly on such areas as health care, reducing teen smoking and aiding dislocated tobacco farmers.

But Hutchison and other Republicans rejected any conditions on the money. ``I don't want to have strings, burdens on states.

This is their money,'' Hutchison told the panel.

The tobacco amendment was opposed by a handful of Democrats, including Sen. Tom Harkin of Iowa, who argued that the Appropriations Committee was not the place to decide such a complicated legal dispute.

``This amendment is premature. I don't think it belongs on this bill,'' Harkin said.

The amendment must still be approved by the full Senate and the House of Representatives. But by attaching it to a broader spending package for Central America and Jordan, Hutchison hopes to speed that process.

Copyright 1999 Reuters