WP: States Face Loss of Funds (billions) From Tobacco Settlement

[DeepModem Mom]

States Face Loss of Funds From Tobacco Settlement
By Marc Kaufman
Washington Post Staff Writer
Tuesday, March 28, 2006; 11:18 PM

States could lose billions of dollars they now receive from tobacco companies under a 1998 national tobacco settlement because the big cigarette makers are losing market share to small companies that did not sign the agreement.

A finding released yesterday by an independent economic consultant concluded that the major companies are losing sales to smaller, generic-tobacco companies because of costs and restrictions imposed by the settlement -- a conclusion that could allow the cigarette makers to withhold as much as $1.2 billion this year.

The 1998 agreement requires companies to pay $246 billion to compensate states for the costs of treating people with smoking-related diseases. In return, the states agreed to end their lawsuits against the industry.

The National Association of Attorneys General, which is administering the tobacco settlement in conjunction with cigarette makers and the states, recently notified the states that they could lose 18 percent of their expected funds.

States have used the money to pay for many services -- including basic health care and smoking-cessation programs; staffing libraries and after-school care; and funding pension shortfalls -- and the loss could be very damaging....

http://www.washingtonpost.com/wp-dyn/content/article/2006/03/28/AR2006032801061.html

[Demit]

1. They lose 2% of market share and threaten to withhold 18% of the payment?

From further down in the article:

"After the agreement was signed, the tobacco companies raised cigarette prices significantly. Miller said the firms had raised prices higher than needed to cover settlement costs, and the loss of sales was partly a result of those higher prices."


The tobacco companies are passing the cost of the settlement off onto their customers already. If they are successful in reneging on their original agreement to the states, they'll end up profiting, you wait and see.