Tobacco settlement funds missing?

Where has the money gone?

Lawmakers are now wondering what ever happened to the over $800,000 received by the CNMI government so far as its share from the multi-billion dollar tobacco settlement.

House Ways and Means Committee chair Rep. Antonio M. Camacho has called Finance Sec. Lucy DLG. Nielsen to shed light on the matter following an inquiry from the Health and Welfare Committee chair Rep. Malua T. Peter.

Ms. Peter has expressed concern that while the money has yet been appropriated by the Legislature, the government has already spent the funds handed over to the Commonwealth since 1999.

“It has to be deposited in a special account and not co-mingled with the general funds,” she told reporters yesterday. (See related story on page 3)

She pledged to find out whether expenditures of the funds have complied with the terms of the agreement which was reached in 1998.

The inquiry is prompted by legislation filed by Ms. Peter in which she proposed establishment of a trust fund dedicated solely for the money received by the CNMI, including those in 1999 and 2000, from the tobacco settlement.

This will be set aside under the expenditure authority of the finance secretary for appropriation by legislators by the beginning of each fiscal year, according to HB 12-290 which is being reviewed by the Ways and Means Committee.

Since December 1999, the island government has received about $815,254.94 in five separate remittances. CNMI’s share from the settlement totals to $30 million whose payment is to be spread in 25 years.

These are all part of the $206-billion master tobacco settlement agreement with giant U.S. cigarette manufacturers in exchange for dropping of the lawsuits over health costs on treating sick smokers.

Windfall

The two-year payments, however, are now gone since they were used by the Department of Finance to cut the deficit in the general fund, according to Ms. Nielsen who described them as “windfall” source of revenues.

“Since the funds that we had received in Fiscal Year 2000 are no longer available for appropriation, we would only be able to deposit future funds,” she wrote in a letter to Mr. Camacho.

The DOF chief expressed support for the bill, but opposed provision that would include the payments from the past two years in the proposed trust fund.

“The funds from the settlement agreement should be reserved and spent wisely on programs that would benefit the people of the CNMI,” added Ms. Nielsen.

Under the deal, the CNMI will receive payment annually beginning 1999 until 2024 ranging from half-a-million dollars to $700,000 from tobacco companies.

In order to get its share in the multi-billion tobacco case, the CNMI filed a lawsuit against four of the biggest tobacco companies on December 23, 1998, namely Philip Morris Inc., R.J. Reynolds Tobacco Co., Brown and Williamson Tobacco Corp. and Lorillard Tobacco Co.

Some 46 states and four territories sued the tobacco manufacturers in 1998 and 1999 to collect damages for health expenditures incurred in treating smoking-related illnesses.

Through the National Association of Attorneys General, a settlement agreement was reached and signed by all of the parties. It calls for the tobacco manufacturers to pay steadily increasing amounts to the states and territories as long as the companies manufacture and sell cigarettes and other tobacco products.

The settlement also requires the industry to set up a charitable foundation aimed at reducing smoking among teens as well as to finance a $1.45 billion national public education for tobacco control.

In a separate letter to Mr. Camacho, Assistant Attorney General Elliot A. Sattler said HB 12-290 is an appropriate legislative undertaking, although the AGO leaves the matter to other agencies, such as the Department of Public Health, to weigh the proposal.