Gov. Joe Manchin’s administration is reconsidering its decision not to take a lump sum payment for West Virginia’s portion of the tobacco settlement.
State may take lump sum from tobacco suit
Officials report annual payments are down sharply
September 13, 2006
By Phil Kabler, Staff writer
By Phil Kabler, Staff writer
Plans to cash in the state’s tobacco settlement payments for a lump sum were shelved two years ago, but the Manchin administration is reconsidering that option in light of plunging payments from tobacco manufacturers, the director of the state Budget Office said Tuesday.
As part of the 2000 settlement of a 46-state lawsuit against the five largest tobacco companies, West Virginia stands to receive as much as $1.9 billion in settlement payments through 2025.
However, because of overall declines in sales, a loss in market share to off-brand manufacturers, and withholding of some payments by some manufacturers, the annual payments to the state have dropped sharply.
For 2005-06, the payments were $51.86 million, or roughly 83 percent of what was projected — the lowest in seven years of settlement payments, state Budget Director Roger Smith told the Joint Committee on Finance Tuesday.
That produced a shortfall of $10.22 million over the projected payments for the year, the largest single-year shortfall in seven years of payments, and nearly double the $5.59 million shortfall for 2004-05.
Smith, meanwhile, said there is no reason to expect payments to increase this year.
“For budget purposes, we’re not going to look at collecting more money [in 2006-07] than we did this year,” he said.
Given that outlook, Smith said the governor’s office has asked Public Resources Advisory Group, the private financial consultants retained by the state, to revisit the idea of selling off the rights to future settlement payments through tobacco settlement securitization bonds.
Lara Ramsburg, spokeswoman for Gov. Joe Manchin, confirmed that PRAG has been asked to determine the viability of issuing the bonds.
“With the numbers dwindling, it’s a matter of making sure we’re doing what’s in the best interest of the state, and that we get as much of a share of what’s due us as possible,” she said.
“We may be in a different situation today than we were back than,” she said of the decision in 2004 not to sell tobacco settlement bonds.
Smith said one factor that derailed the sale in 2004 was that at least two states that sold bonds that year had to guarantee the bonds with state funds, in the event settlement payments dropped below projects.
“It’s my understanding since then that has changed,” he said.
Also Tuesday, Mark Muchow, state director of fiscal policy, said state cigarette tax collections increased 7 percent, to $107.12 million, in 2005-06, after several years of flat collections.
It appears the difference, he said, was that cigarette taxes in Ohio increased from 55 cents to $1.25 a pack last year.
“I think that was probably enough of an increase that people who are close enough in Ohio are driving across the border,” Muchow said.
State’s tobacco settlement choice debated
September 13, 2006
Gov. Joe Manchin’s administration is reconsidering its decision not to take a lump sum payment for West Virginia’s portion of the tobacco settlement.
The plan is being reconsidered in light of plunging payments from tobacco manufacturers, the director of the state Budget Office said Tuesday.
As part of the 2000 settlement of a 46-state lawsuit against the five largest tobacco companies, West Virginia stands to receive as much as $1.9 billion in settlement payments through 2025.
However, because of overall declines in sales, a loss in market share to off-brand manufacturers, and withholding of some payments by some manufacturers, the annual payments to the state have dropped sharply.
For 2005-06, the payments were $51.86 million, or roughly 83 percent of what was projected — the lowest in seven years of settlement payments, state Budget Director Roger Smith told the Joint Committee on Finance Tuesday.
That produced a shortfall of $10.22 million over the projected payments for the year, the largest single-year shortfall in seven years of payments, and nearly double the $5.59 million shortfall for 2004-05.
Smith, meanwhile, said there is no reason to expect payments to increase this year.
“For budget purposes, we’re not going to look at collecting more money (in 2006-07) than we did this year,” he said.
Given that outlook, Smith said the governor’s office has asked Public Resources Advisory Group, the private financial consultants retained by the state, to revisit the idea of selling off the rights to future settlement payments through tobacco settlement securitization bonds.
Lara Ramsburg, spokeswoman for Gov. Joe Manchin, confirmed that the advisory group has been asked to determine the viability of issuing the bonds.
“With the numbers dwindling, it’s a matter of making sure we’re doing what’s in the best interest of the state, and that we get as much of a share of what’s due us as possible,” she said.
“We may be in a different situation today than we were back than,” she said of the decision in 2004 not to sell tobacco settlement bonds.
