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Friday, March 7, 2003

House Approves Diverting Tobacco Funds

By Barry Massey
The Associated Press
    SANTA FE The House approved a proposal Thursday to divert tobacco settlement revenues for budget increases over two years, and lawmakers also are considering a cigarette tax increase to provide more money for government spending.
    The House-passed measure will free tobacco revenues for general government operations but keep a tobacco settlement permanent fund intact.
    The measure was developed by House Democratic leaders as an alternative to a proposal by Gov. Bill Richardson to abolish the tobacco permanent fund and use all tobacco revenues annually for government operations, mainly the rising cost of Medicaid.
    The House passed the bill 34-28 and sent it to the Senate for consideration. The Senate previously approved legislation to carry out Richardson's plan.
    Richardson said Thursday he disagreed with part of the House proposal but expressed optimism that a compromise would be reached with lawmakers and anti-smoking groups on a broader financing package involving tobacco revenues.
    Part of the package being developed is a proposed increase in the tax on cigarettes, potentially by 70 cents a package. A measure under consideration in a Senate committee would provide extra money for the state and an expansion of medical facilities at the University of New Mexico. Part of the revenues also could go to pay for Medicaid, anti-smoking programs and other health-related services.
    A 70-cent increase in the tax, from 21 cents to 91 cents per pack, could generate nearly $47 million.
    The House-passed bill would change the way New Mexico deals with money it receives from a 1998 settlement with tobacco companies of lawsuits brought by states to recover health care costs from tobacco-related illnesses.
    New Mexico is estimated to receive more than $1 billion over 25 years.
    The state splits its estimated $40 million yearly allotment of revenues: half remains in a permanent fund that earns interest and half is available to spend on health and education programs, including anti-smoking efforts.
    Supporters say the tobacco revenues are needed to help New Mexico pay for double-digit growth in the costs of Medicaid, which provides health care for the poor and uninsured children in lower-income families.
    Opponents said the state should focus on curbing Medicaid costs rather than scrambling to find additional monies for budget increases.
    "What we're doing is a shell game," said Rep. Daniel Foley, R-Roswell.