Md. to join tobacco settlement State expects to gain $4.2 billion during the first 25 years

All 46 eligible states signed

Legislators bicker already over how to spend revenue

November 21, 1998|By Scott Shane | Scott Shane,SUN STAFF Reporter JoAnna Daemmrich contributed to this article.

Calling it a flawed deal but one that will save lives, state Attorney General J. Joseph Curran Jr. announced yesterday that Maryland would accept a tobacco settlement that will pay the state more than $4.2 billion, take cigarette ads off billboards and taxis, ban Joe Camel-style cartoons and finance anti-smoking campaigns.

Flanked by Gov. Parris N. Glendening and Baltimore attorney Peter G. Angelos, whose law firm is likely to collect several hundred million dollars for handling the state's lawsuit, Curran said he had tried but failed to persuade several other states to hold out for a better deal.

"We concluded that if Maryland held out, we'd have no other ally," he said. Under those circumstances, Curran said, the state could not expect a better settlement and did not want to gamble on taking the case to trial in April.

By yesterday's noon deadline, all 46 states that had not previously settled with the industry had signed on to the deal, valued at $206 billion and the largest legal settlement in world history.

Tobacco executives considered the deal a triumph, ending the major legal threat to the industry for a sum that will be covered by a 35-cent increase in the price of a pack of cigarettes. Analysts said they expected tobacco stocks to move up.

Public health groups had urged rejection of the agreement because of what they saw as gaping loopholes -- allowing tobacco signs of up to 14 square feet on stores; allowing each company to sponsor one sporting event per year and to sell cigarette brand-name merchandise at the events; and a ban on similar future lawsuits by states or localities.

But yesterday the critics mostly muted their cries, declaring the settlement one more step in the battle against tobacco. Maryland anti-tobacco activists praised Curran and Deputy Attorney General Carmen M. Shepard for fighting to make the deal stronger.

"Unfortunately, this settlement doesn't go as far as we hoped," said Dr. Robert K. Brookland, a radiation oncologist and past president of the American Cancer Society in Maryland. "We have much more to do."

Anti-tobacco forces are shifting their efforts to the General Assembly, pushing to raise the state's 36-cent tax on a pack of cigarettes by $1.50 to price cash-poor teens out of the market.

Glendening, sporting a blue "Support the Tobacco Tax Increase" sticker, reiterated his support for raising the tax. Lawmakers were divided over whether the settlement would weaken that push.

Sen. Leo E. Green, a Prince George's Democrat, said he was optimistic that the settlement "is going to raise the consciousness level."

But Republican leaders argued that a higher tobacco tax would be a tough sell when the state has the largest surplus in a decade.

"The idea that we would then want to create a new tax is just a ludicrous proposal at this time," said Del. Robert L. Flanagan, a Howard County Republican and the House minority whip.

The settlement will pay Maryland $54 million the first year, with the first payment set for next June, Glendening said. The annual payments will rise quickly to $190 million in 2003 before leveling off at about $180 million.

Though the payments have often been described as being spread over 25 years, the settlement actually continues them indefinitely, though they will be reduced if national cigarette sales fall. Economists have calculated the value of the first 25 years of the state's deal to be at least $4.2 billion in today's dollars, or about one-fourth of the state's annual budget. Payments will be increased by a minimum of 3 percent per year to cover inflation.

Maryland is also expected to receive a delayed bonus payment of $500 million to $1 billion, with the exact amount to be set by a panel of retired attorneys general, in recognition of its early filing and relatively strong case. That money will be paid starting in 2008.

State lawmakers predicted considerable wrangling over the windfall in the General Assembly. The governor vowed again yesterday to press the legislature to earmark most of the money for anti-smoking programs, education and children's health.

He said he wants to build and renovate schools, reduce class size and try to reduce Maryland's infant mortality rate.

Looking for tax cuts

But some Republican legislators said they would push for cutting taxes or reducing the state's capital debt. And special interest groups are already lining up their appeals.

"Everybody in the world is going to have some special way to spend it," said House minority leader Robert H. Kittleman.

Angelos, who bought the Orioles with millions earned suing asbestos companies, contracted in 1996 to finance and litigate Maryland's case in return for 25 percent of any recovery. That was the best deal offered to the state by any law firm bidding for the case.

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