State Due Largest Ever Tobacco Settlement Paymenthome Contractors Indicted For Stealing $1 Million From Elderly Woman

Attorney General Spitzer announced that a $681 million tobacco settlement payment is scheduled to be received today. The payment, which will be divided among New York State, New York City and the 57 counties outside New York City is 30 percent higher than the $519 million payment made in April 2001.

This $681 million payment is by far the largest ever received by New York State under the Master Settlement Agreement (MSA), and increases the total MSA payments to $2.75 billion since December 1999.

"New Yorkers usually dread April 15th because it is tax day," Spitzer said. "This huge influx of MSA funds to state and local coffers will help reduce the amount of taxes that New Yorkers will have to pay in the future."

There are actually three separate payments being made this month. Today's $681 million payment consists of the $646 million from the scheduled April 2002 payment, plus another $35 million that was withheld from the January 2002 payment. A small portion of the April 2002 payment (about $19 million) is scheduled to be paid on April 22, so the total amount received this month will be approximately $700 million.

New York State, New York City and each county will receive its usual percentage allocation of today's $681 million payment, with the state scheduled to receive $348.5 million (51 percent), New York City receiving $181.6 million (27 percent), and a total of $150.9 million (22 percent) being paid to the other 57 counties. The $19 million to be delivered next week will be divided similarly.

These payments are part of the 1998 tobacco MSA, which requires tobacco companies to pay over $200 billion to 52 states and territories, and imposes significant marketing and advertising restrictions on the participating tobacco manufacturers. New York is expected to receive about $25 billion by the year 2025, with additional payments continuing thereafter. There are two major MSA payments each year until 2004 -- one in January and one in April -- followed by annual payments every April thereafter.

Each tobacco settlement payment is based on a complex formula set forth in the MSA. The calculations begin with a base amount, which may increase or decrease depending on a number of factors, including national cigarette shipments, non-participating manufacturer sales, inflation and other adjustments.

"As expected, we are continuing to see major increases in the tobacco settlement payments, even though cigarette consumption decreases," said Spitzer. "That is because the MSA base amounts increase almost every year until 2004. There has been a 19 percent decrease in smoking nationwide since 1997, which is great news from a public health perspective, and should lead to significant savings in health care costs in the future."

The Attorney General also noted that most counties have been budgeting these funds conservatively, and therefore should greatly benefit from the size of today's settlement payment.

This is the seventh "major" payment that New York State and local governments have received under the MSA, each of which has exceeded $245 million. The payments received so far are set forth below:

Year Initial Payment April Payment Other Payments Total
         
1999 $315 million None None $315 million
2000 $274 million $441 million None $715 million
2001 $247 million $519 million $6 million $772 million
2002 $272 million $700 million NA $972 million
         
        $2.7 billion

The attached chart shows the allocation of today's anticipated $681 million payment to New York State and its local governments. The Attorney General's Office, which provides periodic tobacco settlement payment information to assist municipal officials in their financial planning, recommends that local officials be as conservative as possible in budgeting because of the frequent changes in payment amounts.

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