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Frequently Asked Questions About the Tobacco Settlement


The 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 settlement money.

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 participating 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 is used 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 tobacco prevention.

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, packaging or labeling. Cigarettes cannot be advertised on outdoor billboards, trains, taxicabs, or buses. Tobacco advertising signs can be no larger than a 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 reduce youth tobacco use and tobacco-related disease and eliminate disparities in access to prevention and cessation services. The settlement also created a $1.45 billion National Public Education Fund to carry out the national advertising and education program which provides the majority of 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 product that, when used as intended, caused sickness, disease and death. It also 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. In addition, the suit claimed the industry targeted children in its advertising in order 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 should 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 that tobacco will result in more deaths in Maryland and across the country than alcohol, AIDS, car crashes, illegal drugs, murders and suicides combined.

[Last updated: 4/12/07]




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