Formula Set Up for State Tobacco Deal

Lawyers for the state of California and local governments have reached an agreement that could send $725 million over 25 years to Orange County if state attorneys general settle the current raft of lawsuits against the nation’s tobacco companies.

The proposed formula, The Times has learned, also could send about $2.8 billion to Los Angeles County and $287.5 million to the city of Los Angeles.

Those amounts would represent shares of $23 billion that California is expected to garner from a nationwide settlement with the tobacco companies that seems likely to end up being in the range of $200 billion, according to lawyers close to settlement talks that appear headed toward a conclusion in September.

The formula for dividing up California’s share of any settlement was resolved this week by a memorandum of understanding among lawyers for Atty. Gen. Dan Lungren, Lt. Gov. Gray Davis, the Los Angeles County Board of Supervisors, San Francisco City Atty. Louise Renne and a former San Diego teacher, all of whom are named as plaintiffs in several massive suits against the industry.

In mid-July, a judge in San Diego consolidated the five major anti-tobacco cases in California. The cases involve two basic types of claims. One is an attempt by officials to recoup money they claim to have spent over the years paying health-care costs for smokers eligible for government programs. The other is a series of allegations of fraud committed by the tobacco companies.

Orange County Supervisor Todd Spitzer said the settlement, if it goes through, could help the county’s Health Care Agency.

“I’m looking forward to seeing the settlement parameters,” he said. “If this could help increase the county’s net share of services, that would certainly take the sting out of cutbacks we made during the bankruptcy.”

In January, the Board of Supervisors increased funding for services that help prevent disease, crime and social ills, including funding for tobacco use prevention programs that target youths and help for smokers who want to quit.

Los Angeles County Supervisor Zev Yaroslavsky, who has taken a lead role for the supervisors in their suit against the cigarette manufacturers, praised the pact but cautioned that a settlement was not a certainty.

“It’s remarkable that the biggest local government entities in California have managed to agree to an apportionment of money that may not exist at all,” Yaroslavsky quipped.

If all goes well, he said, the agreement will provide a huge windfall for cash-strapped Los Angeles County. But he stressed that “tobacco expenses will be an ongoing problem for us.”

The pact would bring slightly more than $100 million a year to the county for the next 25 years, he noted. But the county estimates that its annual expenses for treating tobacco illnesses are about $300 million.

The 19-page accord provides that any money obtained from the tobacco companies--either from a settlement or from litigation--would be split up under the same allocation formula: Half the money would go to the state. Of the remaining half, 10% would be split equally among four large cities--Los Angeles, San Diego, San Francisco and San Jose--that have sued the industry. The rest of the money would be divided among California’s 58 counties on a per capita basis.

Los Angeles County would get by far the largest share because the county contains more than a quarter of the state’s population.

Under the formula, if the state receives an overall $23 billion, Orange County would get roughly $725 million over 25 years. Ventura County would receive just over $200 million, and San Diego County would get approximately $825 million while the city of San Diego would receive the same amount as the city of Los Angeles.

The tobacco industry already has agreed to pay $38 billion to settle with four states, and negotiations to resolve the remaining suits--launched after national tobacco legislation foundered in the U.S. Senate in June--have been going on for more than a month.