State To Receive Half Billion Dollar Tobacco Payment

Attorney General Spitzer today announced that New York State, New York City and the 57 counties outside New York City are scheduled to receive a total of $518 million from the tobacco companies on April 16. This is the largest payment that New York has received so far under the Master Settlement Agreement (MSA) with tobacco companies.

"One-half billion dollars is an amazing amount of money," Spitzer said. "As we head to a possible economic slowdown, this infusion of cash will provide some welcome relief to New York's taxpayers."

New York State, New York City and each county will receive a share of the $518 million payment, with the state scheduled to receive $265 million (51 percent), New York City receiving $138 million (27 percent), and a total of $115 million (22 percent) being paid to the other 57 counties.

The payment is part of the 1998 tobacco MSA, which requires tobacco companies to pay $206 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 over the first 25 years of the settlement, with additional payments continuing thereafter.

With this additional $518 million payment, New York will have received a total of $1.8 billion from the tobacco companies in less than two years.

The payment that the state, New York City and each county receives is based on a complex formula set forth in the MSA. The calculations begin with a base amount, which increases and decreases depending on a number of factors, including national cigarette shipments, non-participating manufacturer sales, inflation and other adjustments.

"This payment is somewhat larger than anticipated," said the Attorney General. "Although tobacco usage continues to decline, it is doing so at a slower rate than before. In addition, this payment is adjusted for inflation, which has helped to offset the drop in consumption."

There were steep declines in cigarette consumption due to price increases imposed by the tobacco companies immediately following the settlement, and this resulted in lower settlement payments the first two years.

This is the fifth payment that New York's state and local governments have received under the MSA, and it is by far the largest, exceeding the next largest payment by over $75 million. The payments received to date are as follows:

Year Initial Payment April Payment Total
1999 $315 million None $315 million
2000 $274 million $441 million $715 million
2001 $247 million $518 million $765 million
    Total: $1.795 billion  

 

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