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Post date: April 21 2005

Tobacco Settlement Payment Exceeds $804 Million

Attorney General Spitzer said today that the state and its local governments have received more than $804 million under the tobacco Master Settlement Agreement (MSA). This year’s payment is the single largest disbursement ever made under the national agreement.

"MSA payments continue to rise as smoking rates decline," Spitzer said. "This is good news for financially-strapped governments and good news for public health."

MSA payments are divided among New York State, New York City and the 57 counties outside New York City. Of the $804 million payment, the state received $412 million (51.2%), New York City received $214 million (26.7%), and a total of $178 million (22.1%) was divided among the other 57 counties.

The payment was made in two parts. Most of the funds were transferred to the state and its local governments on Friday, April 15. The remainder was transferred on Tuesday, April 19.

Since payments began in 1999, New York has received more than $5.3 billion.

The 1998 MSA requires tobacco companies to pay billions of dollars to 52 states and territories, and imposes significant marketing and advertising restrictions on the participating tobacco manufacturers.

Each tobacco settlement payment is based on a complex formula set forth in the MSA, including factors such as national cigarette shipments, inflation and other adjustments. As a result, it is very difficult to predict how much will be received in any given year.

In addition, in certain circumstances, tobacco companies have the ability to withhold disputed portions of their payments. There are a number of pending disputes under the MSA, and these could have a significant impact on payments in future years.

Attorney General Spitzer, as he has done repeatedly in past years, urged counties to budget conservatively. "It is much better to be pleasantly surprised by the size of a payment, rather than be overly optimistic and then be forced to raise taxes or cut services if a payment is lower than expected," he said.

Attached are two charts. The first chart shows the MSA payments made to New York in each year since 1999. This chart reflects the fact that, according to the terms of the MSA, there is one annual payment. Previously, there were two payments each year. The second chart shows the allocation of the latest $804 million payment among New York State, New York City and the 57 individual counties.