CALIFORNIA BACKS TERMS OF TOBACCO SETTLEMENT

WASHINGTON -- California smokers may eventually pay from 35 cents to
40 cents more for a pack of cigarettes, smoke less and no longer see
those ubiquitous cigarette billboards under the historic $206 billion
tobacco settlement announced Monday.

But some California anti-smoking advocates were furious with the
tentative settlement, noting it calls for California to receive less
than $1 billion a year, while state costs of treating smoking-related
illnesses are closer to $1.7 billion a year.

``This is a bad deal for California,'' said Paul Knepprath, assistant
vice president of government relations for the American Lung
Association. ``It does little to protect public health and a lot to
protect the tobacco industry.''

California was one of at least 11 states to support the terms of the
settlement Monday. State officials have until Friday to decide whether
to join them or continue to fight the tobacco industry in court on
their own.

If approved by the states, the agreement will eliminate the single
greatest legal threat facing the $50 billion-a-year industry. However,
the industry still faces hundreds of lawsuits filed by well-financed
plaintiffs' attorneys.

In a Monday news conference, State Attorney General Dan Lungren, who
helped negotiate the settlement, defended it as ``the best possible
deal for California.''

``I believe we have a deal that adequately provides money to
California taxpayers for their damages and also achieves significant
public health initiatives that could not have been obtained through
legislation or even completed litigation,'' Lungren said.

Lockyer asks for delay

However, Attorney General-elect Bill Lockyer renewed his request for a
public evaluation and asked Lungren to hold off on agreeing to the
settlement for another three weeks.

``There ought to be some public disclosure of the details,'' Lockyer
said. ``This is the largest and most complicated civil settlement of
this sort in the country's history. Such a matter merits more than
five days' review.''

Lungren argued that it would set a bad precedent to have negotiated
settlements subject to public review. The appropriate parties have had
enough time to weigh in on the proposed settlement, he said.

Under the terms announced Monday, California would receive nearly $24
billion over the next 25 years. The money would be split 50-50 between
local governments and the state, with the governor and the Legislature
deciding how to use the state's share. San Jose would receive roughly
$287 million and Santa Clara County $500 million over the life of the
25-year agreement, according to estimates.

San Jose City Attorney Joan Gallo said she supports the deal, calling
the financial pot the city will share over 25 years ``very, very
good.'' Under a complicated formula, Gallo said San Jose stands to
receive $3.8 million the first year, with the amount increasing to
more than $12 million a year by 2018.

The agreement would dramatically reshape the way cigarettes are sold
and marketed in the United States.

``It is time to stop the bickering and move the tobacco fights out of
the courthouse and into the street,'' Christine Gregoire, Washington
state's attorney general, said in announcing the plan here Monday.

Prices expected to rise

Although nothing in the deal mandates a price rise, analysts expect
that the companies would pass along the cost in the form of a price
increase of 35 to 40 cents a pack.

Will Snell, an economist at the University of Kentucky, said that a
price increase of that size should lead to about a 14 percent drop in
smoking over five to 10 years. Currently, 48 million Americans smoke.

At the end of the day Monday, 10 other states besides California
announced they support the deal, which was reached during five months
of secret negotiations. They are New York, Washington, North Dakota,
Pennsylvania, Oklahoma, Colorado, North Carolina, Iowa, Arizona and
Arkansas.

Leaders in other states have until noon Friday to decide whether to
sign on to the settlement. Negotiators want a majority of the 46
eligible states to go along, because the tobacco companies still are
waiting to see how many states join before they decide on whether they
sign the deal.

Four states -- Minnesota, Florida, Texas and Mississippi -- already
have settled individual cases over health costs for a total of $36
billion. Even with the state suits settled, the tobacco companies
still face lawsuits from union groups and, most recently, British
Columbia, as well as from individual smokers.

President Clinton called the settlement plan a step in the right
direction Monday and praised the attorneys generals' work.

But he said he also would continue pushing for federal anti-smoking
legislation.

``We are moving forward,'' Clinton said at the White House. ``But we
have a lot more to do, for only the national government can take the
full range of steps needed to protect our children fully from the
dangers of tobacco.''

Clinton talked about continuing to push for regulation of nicotine by
the Food and Drug Administration. Another step would be to increase
the federal excise tax on cigarettes and use the money for tobacco
control programs.

Public health advocates blasted the short deadline that state
officials have to decide whether to join. And some noted there are no
guarantees that the states will spend the money on tobacco-control
efforts.

No `look-back' provision

Knepprath of the American Lung Association pointed out the latest
proposal does not contain a key provision that would penalize tobacco
companies if teen smoking increases. That ``look-back'' provision was
negotiated in the June 1997 settlement that eventually crumbled.

``The companies won't pay a cent if teen smoking skyrockets,''
Knepprath said.

``If you only look at the short-term picture -- at the dollars -- it
looks good,'' said Margo Leathers Sidener, executive director of the
Santa Clara/Santa Benito Counties Chapter of the American Lung
Association. ``But if you look at the long-term picture -- protecting
public health -- it is a sad situation.''

At Lockyer's urging, the chairman of the state Senate Judiciary
Committee announced Monday that he would hold a public forum Wednesday
in Pasadena to discuss the settlement.

``We need to ensure that California is not getting a bad deal that
will cause California taxpayers to subsidize the treatment of
tobacco-caused injuries while the tobacco companies' liability would
be limited and built into the cost of cigarettes,'' said State Sen.
Adam Schiff, D-Pasadena.

Public forum in Pasadena

Lockyer said the three-hour forum will give health advocates,
researchers and others the chance to study details of the 100-page
proposed settlement to determine whether it should be agreed to.

``The public health groups weren't in the secret negotiations,''
Lockyer said. ``Many of the responsible local agencies and many of the
states' AGs weren't part of the discussion.''

Scott Williams, a spokesman for the four major tobacco companies
participating in the deal -- Philip Morris Inc., R.J. Reynolds Tobacco
Co., Brown & Williamson Tobacco Corp. and Lorillard Inc. -- declined
to put a number on how many states are needed for the industry to give
its final OK.

Gail Gibson and Raja Mishra of the Mercury News Washington Bureau and
Mercury News Staff Writer Lisa M. Krieger contributed to this report.

Checked-by: Patrick Henry