Slicing the pie

Sen. Kay Bailey Hutchison will introduce later this week--as soon as the president's trial stops long enough for some legislating to take place--a bill to bar the federal government from horning in on Texas' $17 billion tobacco settlement.

The Texas senator is co-sponsoring the bill with her Democratic colleague Bob Graham from Florida, whose state has also won through litigation a load of tobacco lucre. The two senators contend that the blocking measure is necessary to stop the federal government from grasping for any of the $246 billion in settlements that 46 states have reached with the tobacco industry.

"There is little legal or practical support for the [federal government's] claim to the state funds," the two senators stated in a joint news release last month.

But in the budget that President Clinton introduced earlier this week, the administration indicated that it expected the federal government to recoup as much $16 billion from such state settlements in the next six years, according to Hutchison's office.

Despite the senators' contention, the federal government can argue it deserves a piece of the states' settlements. The supporting theory of such a claim: Although the states alone initiated and pursued the litigation against Big Tobacco, they were suing the cigarette industry for money spent on tobacco-related health-care costs. In most instances, the Health Care Financing Administration in Washington (HCFA) paid a portion of those expenses through Medicaid.

For Hutchison, a high-profile role in stopping the feds from taking a cut of Texas' tobacco money, regardless of its legal merits, presents an almost exclusively favorable political opportunity.

Her anti-fed position aligns her not only with the National Governors' Association, state attorneys general nationwide, and states' rights activists, but also with those concerned about the possibility of reduced federal spending on Medicaid in an effort to recoup the feds' claimed share of the tobacco litigation proceeds.

At the same time, however, Hutchison's recent interest in tobacco litigation represents a significant departure from her prior relationship with the cigarette industry and puts her at risk for charges of opportunism.

Last July, the Campaign for Tobacco-Free Kids noted that Hutchison had received $44,923 in campaign contributions since 1987 from tobacco-industry sources, making her the third-largest recipient of tobacco donations in the Senate. She had, at the time, voted for the national tobacco-control bill in committee but nixed the measure when it came to the floor, saying it would have unreasonably raised taxes on smokers.

Eager to reconcile the senator's prior positions and contributions, Hutchison's spokeswoman Lisette McSoud Mondello notes that the Tobacco-Free Kids' roster reflects a skewed time period. The anti-smoking advocate group counted money the senator received over a six-year period. During that time, Mondello says, it just so happened that the senator, unlike most of her colleagues, had to launch two full-scale campaigns, one for a special election in 1993 and another one a year later for a full-term battle at the ballot box.

Nowadays, Mondello says, Hutchison is no longer accepting campaign contributions from tobacco sources. "She has not accepted or taken any money since 1994," Mondello says.

Whether Hutchison will prevail--and keep Texas' booty out of federal hands--is hard to predict at this stage.

HCFA officials have never stated explicitly when and how they expect to claim their share of the settlement. The agency officials have sent mixed signals to different states' attorneys general over the past few years. But they have made it clear they eventually expect some of the money to land in their coffers.

Testifying before congress in December 1997, Nancy Ann Min Deparle, the administrator of HCFA, told the legislators that the "Social Security Act mandates the states allocate from the amount of any Medicaid-related recovery the pro rata share to which the federal government is entitled."

A spokesman for the agency who asked not to be identified by name said this week that HCFA would "in future years," seek the funds.

In the past, it appears, Texas officials have been ready to turn over the money to the feds without a fight.

In an e-mail to an HCFA official a year ago, Stuart Bowen, an assistant general counsel to Gov. George W. Bush, stated that he understood from the attorney general's office that the feds could claim roughly $4 billion of the state's litigation proceeds. Bowen did not return phone calls from the Dallas Observer.

But Harry Potter, the former assistant attorney general who helped manage the tobacco litigation, concedes the feds have some basis for a claim to the funds.

"Obviously there is some risk," says Potter, who is now teaching law at the University of Texas, "or Senator Hutchison wouldn't have to introduce the legislation.

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Miriam Rozen
Contact: Miriam Rozen