PA plan to spend tobacco money

  1. By Thomas Fitzgerald and Ovetta Wiggins

    HARRISBURG - After nearly two years of wrangling, Gov. Ridge and legislative leaders have agreed on a plan to spend the state's expected $11.3 billion windfall from the national tobacco settlement.

    The deal clears the way for the General Assembly to vote on the plan today before adjourning for the summer. Under the plan, all of the state's tobacco money would be directed to health-care programs.

    "This legislation will trigger the largest, most dramatic investment in Pennsylvania health care ever," Ridge said. "It was worth the wait."

    So far, Pennsylvania has received nearly $853 million from the 1998 settlement with the nation's major tobacco companies, and the money continues to earn about $101,000 per day in interest. The money flows from the historic 1998 settlement of a multistate lawsuit that sought compensation for the costs of treating health problems caused by smoking.

    Of the 46 states that sued, only Pennsylvania and Oregon have not finalized plans to spend the money.

    Pennsylvania expects to get up to $425 million annually for 25 years, but the amount will fluctuate with inflation and cigarette sales.

    Among the initiatives that tobacco money would fund: health insurance for 60,000 low-income adults without it; reimbursement to hospitals for treating uninsured patients; health research; smoking prevention and cessation programs; and home-based care for the elderly.

    Those programs are intended to be ongoing, with allocations determined by a formula in the agreement.

    The tobacco agreement also would shake loose one-time cash infusions for the 2001-2002 fiscal year, which begins next week. A payment of $100 million will be used to create three biotechnology "greenhouses" to speed research from the laboratory to drug firms; $60 million will be set aside for a venture-capital fund to underwrite investments in health sciences; and $68 million would go to other projects that include funding free health clinics for the poor in cities and rural areas.

    It also sets aside 8 percent of the tobacco money yearly, and a $195 million up-front payment, to establish an endowment so the new programs under the plan can be maintained when income from the tobacco settlement declines in the future.

    Waiting so long to come up with a plan may have gained Pennsylvania enough interest on its tobacco payments to be able to afford some of these extra expenditures.

    "This bill is setting up a lot of new programs, and we wanted to craft it so the money wouldn't be wasted," said Erik Arneson, chief of staff to Senate Majority Leader David Brightbill (R., Lebanon). "There is something to be said for taking the time to do it right."

    It took so long to come to an agreement, negotiators said, because Ridge and legislators disagreed over how much should be spent on various health programs.

    Perhaps the biggest stumbling block was House Republicans' insistence that a large chunk of the tobacco money should be used to expand prescription-drug coverage for senior citizens - a promise made before last fall's election, which gave the party a 104-99 House majority.

    Ridge preferred to see what the federal government would do on the issue, and the Senate was less enthusiastic about the House idea. Federal officials have yet to announce a policy.

    In the end, 8 percent of the state's tobacco money - or about $32 million in the first year - will go toward making more middle-income senior citizens eligible for the state's PACENET program for prescription drugs. About 10,500 senior citizens are expected to benefit.

    It is far less than the original House proposal, which would have dedicated more than a third of the money to drug coverage. But it is a compromise between the 6 percent the governor agreed to dedicate to prescriptions and the 12 percent House negotiators had been willing to accept.

    "It's less money than we wanted, but we are not done," said House Majority Leader John M. Perzel (R., Phila.), vowing to press in the fall to get more money for PACENET. He said a task force, with Ridge's approval, will study how to expand prescription assistance.

    "We are keeping our promise" to seniors, Perzel said.

    And, in fact, legislators were discussing last night whether the percentages should be adjusted every five years.

    For now, the largest single portion of the tobacco money, 30 percent, would go toward funding a new health-insurance program for low-income adults who do not get coverage through their employers. Nineteen percent of the money, or $65 million in the first year, will fund medical research at universities and hospitals.

    The plan would set aside 13 percent of the tobacco money - about $45 million in the first year - to provide home and community-based health care for the elderly.

    And 12 percent of the money - about $42 million in 2001-2002 - would go to smoking prevention and cessation programs.

    Antitobacco advocates said they were delighted that a substantial portion of the settlement will be used to prevent smoking, but they were concerned because the agreed-upon funding level is below the federal Centers for Disease Control recommendation - and lower than the 15 percent share Ridge initially proposed.

    The CDC recommended that Pennsylvania spend at least $65.6 million annually on cessation and prevention programs.

    "I feel that we should have gotten what the CDC recommended, because tobacco use and its economic and human costs were what the lawsuit was about in the first place," said Jeff Barg, chairman of Tobacco Free Education and Action Coalition for Health, a Philadelphia-based group.

    "These programs should have been the No. 1 priority," Barg said. "But having said that, this is a substantial amount of money, and we can make a substantial amount of progress with it."

    Currently, the state spends just $2.2 million on smoking prevention and cessation programs.
    Thomas Fitzgerald's e-mail address is
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