STATE TOBACCO YIELD COULD BE IN BILLIONS

Illinois stands to gain $9.1 billion during the next 25 years under
terms of the proposed settlement between tobacco companies and states
to cover smoking-related health costs, officials said Sunday.

"We believe this to be the largest monetary settlement in the history
of Illinois," said Dan Curry, a spokesman for state Atty. Gen. Jim
Ryan.

The proposed $206 billion deal, completed Saturday, was negotiated by
officials in eight states but is designed to cover 46 states that have
not reached broad settlements with the tobacco industry. It replaces
an agreement that fell apart last year for lack of congressional approval.

If the deal is accepted by enough states and the tobacco industry,
Illinois would stand to profit by an extra $1 billion over last year's
failed settlement between the industry, state attorneys general and
anti-smoking activists.

The proposed new settlement, which does not require approval in
Washington, would yield annual payments of at least $300 million to
Illinois through 2025, Curry said.

Illinois was to have received about $8 billion under last year's
proposed agreement. While tobacco companies were to pay more under
that deal--$368 billion--a large portion would have gone toward past
punitive damages and public health initiatives, leaving states with
less cash.

The state attorneys general who negotiated the deal are expected to
announce state-by-state details of the new draft settlement Monday in
Washington, D.C. Each state will have until Friday to decide whether
to sign on, and negotiators for the nation's four major tobacco
companies will then have several days in which to give final approval.

Because the proposed settlement does not require congressional action,
most states are expected to join it. The tobacco companies, hoping to
forge a nationwide agreement, are unlikely to approve the final
settlement unless a large majority of states accept it.

The four major tobacco companies agreeing to the settlement are Philip
Morris Cos., R.J. Reynolds Tobacco, Brown & Williamson Tobacco and
Lorillard Tobacco. Tobacco industry spokesmen have said the industry
would have no comment until after Monday's announcement.

Each state's proposed settlement amount is calculated using a variety
of factors, including its percentage of the nation's Medicaid population.

Ryan met with Gov. Jim Edgar on Nov. 2 in Springfield to update him on
the negotiations. On Sunday, a spokesman said Edgar could not yet
comment on the deal.

Curry said Ryan and office staffers spent the weekend poring over the
settlement's fine print. Ryan is expected to meet again with Edgar, as
well as with state legislative leaders and public health officials, to
discuss the terms before approving it.

Public health advocates said Sunday the proposal falls short of
delivering a comprehensive approach to discourage smoking.

But they declined to recommend whether the states should embrace the
settlement. Anticipating that the deal would be endorsed, anti-smoking
forces were mobilizing to make sure states use the money to discourage
tobacco use.

"We think it's a positive step forward in the war on tobacco, but it's
not the answer and doesn't itself provide a national tobacco control
policy," said Diane Canova, speaking for the American Heart
Association.

Ryan said he would push for most of the money to be spent on
children's health programs. But a $300 million annual windfall,
augmenting the state's $37.4 billion budget, is likely to trigger a
legislative feeding frenzy.

"It would not be earmarked for specific proposals, but the attorney
general would urge that if this came to settlement, the emphasis would
be to help children," Curry said.

Illinois was the 16th state to file claims against the industry, in
November 1996, alleging it was forced to shell out billions in
health-related Medicaid payments because of negligence on the part of
cigarette-makers. From 1980 to 1997, the claim alleges, the state had
to pay more than $2 billion in Medicaid to treat people with lung
cancer and other illnesses related to tobacco.

"To put it in perspective," Curry said, "when Illinois filed its
lawsuit in 1996, at that time people said the chances of this lawsuit
were remote, nobody had ever defeated the tobacco industry in a legal
action, so we think the joint action made a major mark on public
health in this country."

The deal would eliminate Joe Camel and other cartoon characters
designed to market cigarettes to youth and would outlaw all tobacco
advertising on outdoor billboards and placards, as well as in public
transit systems and on shirts, hats and backpacks. A special $1.45
billion fund would be established to educate consumers about
tobacco-related diseases.

Unlike last year's failed $368 billion settlement proposal, the one
completed Saturday no longer calls for regulation of tobacco by the
federal Food and Drug Administration. The new proposal would settle
state lawsuits but would not affect future legal actions against
cigarette makers.

It also would not put caps on the amount of damages that could be
awarded to plaintiffs. Last year's proposal would have limited damages
to $5 billion a year.

The previous settlement was expected to raise the price of cigarettes
by 62 cents a pack for the life of the settlement, while the current
proposal could raise the price by 35 cents.

Mississippi, Florida, Texas and Minnesota all have reached separate
settlements with the industry over the last year.

The eight states negotiating the deal are Washington, California, New
York, North Carolina, Colorado, Oklahoma, North Dakota and
Pennsylvania.

Checked-by: Patrick Henry