Frequently Asked Questions About the Tobacco Settlement
money. How much will the States receive from the settlement, how
much is Maryland’s share, and how much has Maryland actually
received so far?
As of January 2007, Maryland has received more than $1 billion in
The tobacco companies agreed to pay the States a projected $206
billion, over the next 25 years, although the agreement itself
calls for payments
to be made in perpetuity. Maryland’s share of the base payments
is 2.26%, or a projected $4.4 billion for the next 25 years. The Master
Settlement Agreement contains several types of adjustments to the base
payments. The inflation adjustment will increase the annual payment by
the greater of 3% or the Consumer Price Index. However, the “volume
adjustment” has had a negative effect on the payments received
by States. This adjustment compares the number of cigarettes shipped
within the 50 States and the District of Columbia in a given year (“annual
volume”) to the “base volume,” the number of cigarettes
sold in the year prior to the agreement, 1997. If the annual volume
is less than the base volume, the payment obligation of the original
manufacturers is proportionally reduced. Another downward adjustment
is the nonparticipating manufacturer adjustment. The State is currently
litigating with the tobacco companies over this adjustment.
How is Maryland using its money?
The Cigarette Restitution Fund, established by the General Assembly
in 2001, is the State’s depository for all revenues received
from the tobacco industry. By law, the Cigarette Restitution Fund
to fund the Tobacco Use Prevention and Cessation Program, the Cancer
Prevention, Education, Screening, and Treatment Program, and other
State programs that serve health, education, and tobacco prevention
purposes. The Attorney General does not determine the manner in which
Tobacco Restitution money is spent. Rather, the General Assembly and
the Governor make those decisions. The Campaign for Tobacco Free Kids,
the American Lung Association, and other interested organizations have
issued regular reports assessing whether the states are using their
tobacco settlement proceeds to address public health problems posed
by tobacco use. As of December 2006, Maryland ranked 15th among the
50 states and Washington, D.C. in its use of the settlement funds for
Public Health. Has the settlement changed the way cigarettes are
sold and marketed to youth?
Cigarette companies can no longer target youth in advertising, promotions
or marketing. Any industry actions aimed at initiating, maintaining
or increasing youth smoking are prohibited. For example, tobacco companies
cannot use cartoon characters in cigarette advertising, promotion,
or labeling. Cigarettes cannot be advertised on outdoor billboards,
trains, taxicabs, or buses. Tobacco advertising signs can be no larger
poster and stadiums and arenas cannot be named after tobacco products.
Additionally, tobacco companies cannot sponsor events where paid participants
are underage or where there is a significant youth audience.
Does the settlement affect how cigarettes and products with tobacco
logos are sold?
Most definitely. For example, free samples of cigarettes cannot be
distributed in a facility except where the operator ensures that
no underage person
is present. "Proof of purchase" gifts cannot be offered or
distributed through the mail without proof of age.
Are there other ways the settlement works to reduce teen smoking?
Yes, the settlement created the American Legacy Foundation, funded
by the tobacco industry for $25 million a year, which works to
tobacco use and tobacco-related disease and eliminate disparities
in access to prevention and cessation services. The settlement
a $1.45 billion National Public Education Fund to carry out the
national advertising and education program which provides the majority
funding for the highly effective truth® campaign. The Foundation develops
programs that address the health effects of tobacco use through grants,
technical assistance and training, youth activism, counter marketing
and grass roots marketing campaigns, and outreach for populations disproportionately
affected by the toll of tobacco. Through applied research and evaluation,
the Foundation also tests the effectiveness of all funded research efforts
and publishes reports on what factors lead teenagers to start smoking.
How do the states enforce this agreement?
Under the agreement, the state attorneys general have the authority
to request company documents, records, and personnel in order to
determine whether a company is violating the agreement. Each state
has a consent
decree which contains the key public health provisions of the agreement;
the consent decrees may be enforced by the courts.
What was the basis for the Attorney General's 1996 lawsuit against
the tobacco industry?
The suit alleged that the tobacco industry misrepresented and
suppressed important information in a conspiracy to sell an unsafe
that, when used as intended, caused sickness, disease and death.
alleged that the tobacco industry manipulated nicotine in its
product and mislead
Marylanders about the adverse health effects of tobacco while
conspiring to keep safer, alternative products off the market.
the suit claimed the industry targeted children in its advertising
to replace the 400,000 Americans (over 7,300 of them Marylanders)
who die each year from health problems associated from smoking.
How much does the State spend to treat smoking related illnesses?
The State pays approximately $476 million in Medicaid costs directly
associated with smoking each year. Total health care costs in Maryland
per year (both direct and indirect) attributable to smoking are estimated
at around $1.96 billion.
Isn't smoking an individual choice and not the business of the State?
The millions of Marylanders who don't smoke but who pick up the tab
for smoking-related illnesses have made a choice not to smoke--why
they pay for the wreckage caused by the tobacco companies? In addition,
when the tobacco industry intentionally targets minors and manipulates
nicotine to hook them for life, how much free choice is really involved?
The industry ought to be forced to step up -- and buck up -- for the
public health disaster it chose to create.
How many teens actually smoke in Maryland?
Each year, 6,900 young people (under 18) in Maryland become new daily
smokers. Although studies reveal that Maryland’s youth smoking
rates have declined in recent years, as of 2004, 19.8% of Maryland's
12th graders could be classified as recent smokers (i.e., they smoked
cigarettes in any amount within the last 30 days). Of those 12th graders
who are recent smokers, 32.3% are regular smokers (i.e, smoke between
1/2 to 1 pack daily).
How many people actually die from smoking?
More than 6,800 Marylanders will die this year because of tobacco
use. Nationally, more than 400,000 people will die. This means
will result in more deaths in Maryland and across the country than
alcohol, AIDS, car crashes, illegal drugs, murders and suicides
[Last updated: 4/12/07]
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