Debate and Issues Archive

draft settlement

December 7, 1998
CONTACT: Scott Goold at 505.293.2504
Published in the University of New Mexico Daily Lobo,December 14, 1998
Getting Down to the Butts of the Attorneys General Tobacco Deal
On Friday, November 20th, 46 state's attorneys general across the country agreed to a landmark settlement with the tobacco industry. This settlement provided that the tobacco companies would pay an estimated $208 billion over the course of the next 25 years. What does this really mean to New Mexicans?

The most-recent national figures (1993) for total medical expenditures attributable to smoking amounted to an estimated $72.7 billion. For the U.S. as a whole, this works out to about $300 per person per year.

In general, individuals do not pay this sum directly. The public costs are supported through our tax dollars. People with employer-funded insurance find their employers pay the higher costs for medical insurance. Yet there is no free lunch. The bottom line is that whether though taxes, work-related benefits or direct medical insurance costs, each American, every man, woman and child in this country, pays approximately $300 per year to support the medical costs associated with smoking.

For a family of four, they pay -- either directly or indirectly -- approximately $1,200 per year.

New Mexico is scheduled to receive approximately $40 million per year from the tobacco industry over the course of the 25-year settlement. If the money were divided equally among the state's 1.5 million residents, each individual would receive about $27. For a family of four, this would be an additional $108 for the year.

While a family of four pays indirectly or directly an estimated $1,200 per year to cover the medical costs associated with smoking, the settlement returns to them about a hundred dollars. This doesn't seem to be much of a deal, does it?

At present, public officials in New Mexico have suggested that the state should not spend the money immediately. They would like to see the revenue placed into a growth fund. Assuming the fund returns a 6% interest rate, the state would receive $2.4 million dollars in interest the first year. This would work out to $1.60 for every man, woman and child in New Mexico. For a family of four, this would be about $6.40 -- less than ten bucks. This is how much a family can expect their taxes to be reduced or their public services to be increased based on the first year's payment by the tobacco industry.

The next time you become frustrated with the high rate of taxes in the state or your low rate of pay at your job, consider that New Mexico's attorney general agreed to the tobacco settlement. With this signing, he gave up the right to recover the public costs associated with past tobacco-related medical expenses, and he gave away our right to recover future public costs associated with smoking -- at least for 25 years.

The tobacco industry insisted that the attorneys general sign the settlement after only a week of review. Clearly, the tobacco industry did not want the public to be informed as to the specifics of this settlement. When you get down to the butts of the tobacco settlement, it doesn't seem to be a very good deal for New Mexico.

For more about this issue, see the CCAA Web site at: