The machinery to produce millions of extra dollars to get the state out of its recession-induced budget deficits -- without requiring a tax hike -- has begun to crank up at the State House. Initially proposed by Governor Lincoln Almond, the money-producing idea seems likely to be backed by the General Assembly.

But there are critics, namely the Campaign for a Healthy Rhode Island, a coalition of health-care and community groups, which is furious about the source of the money: the millions that the state is getting from five major tobacco companies as the result of a nationwide settlement with 46 states.

This is a variation of a debate that critics have been losing since the settlement was ratified in 1998 and the state began steering most of the money it receives -- about $54 million this year -- into general expenses. Health-care advocates say substantial portions of the money should be used instead for programs aimed specifically at persuading teenagers to quit smoking or never take up the habit, and bankrolling smoking cessation programs.

Currently, the state spends only $2 million; anti-smoking forces contend that $10 million is the right amount, according to guidelines from the federal Centers for Disease Control. The debate has been sharpened by Almond's proposal to sell a portion of the expected tobacco income over the next three decades to bondholders, so that the state would receive a huge chunk of money upfront, rather than having to wait for the money to "dribble" in. The concept goes by a name only an investment banker could love -- "securitization" -- meaning it assures the state of getting the money now instead of the later, when the tobacco companies' profits may be less.

The catch is that the amount of money the state would receive upfront -- about $602.5 million -- is considerably less than the $1.7 billion supposed to come in over time.

The anti-tobacco crowd says this means less money for tobacco control and related programs. Further, they fear that this is a "quick-fix" approach to the state's overall budget problems, and that a couple of years down the line, without the additional tobacco money, cuts will have to be made to the vaunted RIte Care program for working poor and welfare families and similar efforts.

The Republican governor and Democratic House are in agreement on this one. Both believe that it makes sense to plug tobacco money into the budget, since health costs are among the fastest-growing portions of state spending. One source says it makes sense to take a big portion of the tobacco money up front, a classic anti-recession strategy.

By fully supporting programs like RIte Care today, the thinking goes, the state avoids ruinous cutbacks, and when the recession end, a growing economy will replace the money the state had to give up to get the tobacco money now. The Senate leadership is urging a slower pace to develop a tobacco bond scheme, but some observers don't expect them to reject the concept.

But Kathryn Hopkins, a spokeswoman for the coalition, says the idea is shortsighted and misses the reason for why states have received billions of dollars from the tobacco companies: they had to pay enormous costs because of people getting sick and dying from smoking-caused cancer.

Issue Date: May 3 - 9, 2002