2004 Tobacco Settlement Payment

Attorney General Spitzer today announced that the state and its local governments are receiving $793 million under the latest payout of the tobacco Master Settlement Agreement (MSA).

"This is an important infusion of cash for our local governments, which are struggling to balance their budgets," Spitzer said. "Every dollar that we bring in helps to reduce the burden on our taxpayers, and so I am pleased to announce this payment."

The payment is being made in two parts. About $764 million was paid by wire transfer on April 15. A second wire transfer of about $30 million is being made today.

All tobacco settlement payments are divided among New York State, New York City and the 57 counties outside New York City, in accordance with a formula agreed upon in 1998. The state is scheduled to receive $406 million (51.2 percent), New York City is receiving $212 million (26.7 percent), and a total of $175 million (22.1 percent) is being divided among the other 57 counties.

These payments are part of the 1998 tobacco MSA, which requires tobacco companies to pay over billions of dollars to 52 states and territories, and imposes significant marketing and advertising restrictions on the participating tobacco manufacturers. The first of five "initial payments" was made in December 1999, and from 2000 through 2003 there were two payments each year – an "initial payment" in January and an "annual payment" in April. The January "initial payments" ended last year, and so there will be a single "annual payment" every April from now on.

Each tobacco settlement payment is based on a complex formula set forth in the MSA. The calculations begin with a base amount, which may increase or decrease depending on a number of factors, including national cigarette shipments, non-participating manufacturer sales, inflation and other adjustments. As a result, it is very difficult to predict how much will be received in any given year.

Over the past several years, New York State, New York City and several counties chose to "securitize" their settlement payment streams in return for large "lump sums," and payments are used to pay off those bonds. Many other counties instead decided to keep the revenue stream, and their payments go directly into their county coffers.

"Our county leaders know that these payments can vary significantly, and so they have been very responsible in the budgeting process," Spitzer said. "By using estimating future payments conservatively, they have been able to avoid unexpected tax increases that otherwise would have to be imposed."

This latest $795 million payment increases the total amount received by New York to $4.5 billion since 1999.

Attached are two charts. The first chart shows the MSA payments made to New York in each year since 1999. The second chart shows the allocation of the latest $795 million payment among New York State, New York City and the 57 individual counties.

Attachments:

• Total Tobacco MSA Settlement Payments - PDF Format
• Allocation of Payment - PDF Format
  

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