Tobacco payments to Utah may drop

Record-low cigarette sales in the United States could mean less money coming to the states through payments from big tobacco manufacturers, although how much and when the states would take the hit remains uncertain.

Utah is scheduled to receive an estimated $29.5 million payment next month as part of its share of the 1998 Master Settlement Agreement with the tobacco makers, an amount that appears safe from the adjustment now being sought from the companies.

"The things that I'm hearing right now, it looks like it's OK," said Richard Ellis, Gov. Jon Huntsman Jr.'s budget director. But, he said, if the adjustment is ultimately granted, the resulting reduction in future payments "could be relatively significant."

The states' lawsuit against tobacco makers originally sought to stop deceitful advertising practices and the marketing of tobacco products to children. And while many Americans may have kicked the tobacco habit, Ellis said, many states have not.

"We've become addicted to the tobacco money," he said.

Tobacco producers have sought the adjustment based on their market share loss in 2003. To succeed, they must convince an independent auditor that the settlement was a "significant factor" in that loss to other producers who chose not to participate in the settlement.

According to the Utah Attorney General's Office, the potential national adjustment for 2003 could be as much as $1.4 billion.

The auditor issued a preliminary decision earlier this month that the agreement was significant in the companies' losses. States now have the opportunity to object before a final decision is rendered on March 27.

Payments to the states are due April 17, and the Attorney General's Office is optimistic the state will receive its expected amount.

"We hope and trust they will pay in full," assistant attorney general Mark Burns said.

Different states opted to receive their share of the $206 billion settlement in different ways. Some have already settled their claims while others, like Utah, will receive payments over the next 25 years. To date, the state has received close to $200 million.

Utah's share of the settlement is $836 million. According to statute, a portion of the state's annual payments go into a trust fund, and the remainder funds things such as the Children's Health Insurance Program, the Department of Health's Tobacco Prevention and Control Program and cancer research at the University of Utah.